Discount Investment bond yields jump as asset values plummet

Published date21 March 2023
This not very prestigious club of companies with bonds traded at junk yields, which for some time has included Chaim Katzman's income-producing real estate companies G City and Norstar and real estate developer Hanan Mor, was recently joined by Discount Investment Corporation, against a background of its publicly traded holdings rapidly losing value and a challenging debt repayment schedule for the coming years

These yields indicate a rise in the level of risk that investors attribute to the companies, blocking access to recycling of debt on the market. Discount Investment's three series of bonds, amounting to an aggregate NIS 2.2 billion, are currently traded at yields of 12-14%. In the absence of any possibility of recycling the debt, the company will have to find other ways of raising the money required to meet its commitments.

Discount Investment is a holding company without a controlling interest. Just over two years ago, a consortium of investors headed by Tzahi Nahmias's income producing real estate company Mega Or won an auction of the 82% controlling stake in the company by the receiver of IDB, beating the bid of the former controlling shareholder in IDB and Discount Investment Eduardo Elsztain.

The buyers were considered an all-star business group. Besides Nahmias, who serves as chairman of the company, it consisted of the Salkind brothers' Elco, which like Mega Or holds 30% of Discount Investment, retailing and aviation magnate Rami Levy (11%), and Chen Lamdan (5%).

The group paid a total of NIS 1.1 billion for the shares in Discount Investment, which now looks like a failed investment, giving a paper loss of over 50%. Discount Investment, headed by Nataly Mishan-Zakai, currently has a market cap of just NIS 636 million, after a 60% drop in its share price in the past year.

Against the threatening bond debt, Discount Investment holds the controlling interest (63%) in Property & Building, which controls income-producing real estate company Gav Yam Lands Corp. (Bayside), and a controlling stake (36%) in telecommunications company Cellcom. It also controls agricultural produce company Mehadrin and technology holdings company Elron.

As mentioned, investors are concerned at the rapid fall in the value of Discount Investment's assets in the past few months, driven partly by the rise in interest rates. The value of Discount Investment's stake in Property & Building has fallen by 45% in the past six months, and now stands at NIS 764 million, about half...

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