Property & Building Corp. (PTBL) bonds gained, sending the yield to a three-week low, after a report that the Israeli company controlled by IDB Holding Corp. (IDBH) may sell the HSBC office tower in New York for $775 million.
The yield on the Tel Aviv-based company’s 1.57 billion shekels ($434 million) of 5 percent notes due November 2017 fell six basis points, or 0.06 percentage point, to 3.11 percent, the lowest since March 10, at the close in Tel Aviv. Israel’s benchmark 4.25 percent bonds due March 2023 yielded 3.9 percent, down two basis points.
Property & Building, controlled by IDB Holding Corp. through its Discount Investment Corp. (DISI) unit, may earn $170 million of profit from the sale of the tower, Calcalist newspaper reported today, without saying where it got the information. Shares of the company also surged to the highest level since August 2011 on optimism the deal will “help reduce high leverage,” according to Adar Etzioni, Tel Aviv-based head of research at Migdal Capital Markets Ltd.
“The company would make a profit from the sale and have free cash flow for distributing dividends this year, which might also help its parent company,” Etzioni said by phone.
IDB Holding is in talks with bondholders to negotiate a settlement as it struggles to make debt payments. Property & Building bought the tower for $330 million in 2009, Calcalist said.
The yield on IDB Holding’s 1.07 billion shekels of 2020 bonds rose 31 basis points to 61.09 percent. Property & Building shares climbed 5.1 percent to 211 shekels.
The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, rose for a fifth day, advancing 0.1 percent to 286.19.
One-year interest-rate swaps, an indicator of investor expectations for rates over the period, were unchanged at 1.64 percent. The shekel weakened 0.2 percent to 3.6203 a dollar at 4:47 p.m. in Tel Aviv. The currency strengthened 3.1 percent this year, the second-best performer among 31 currencies tracked by Bloomberg.
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