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Israeli Market Developments

July 2012 - Finance. Legal Developments by Herzog Fox & Neeman .

More articles by this firm.

Welcome to the 4th edition of Unfolding, which looks at some important developments in Israel in recent months.  Much has happened in Israel since the last edition of Unfolding. The Israeli economy may be small in scale, but never in the level of its business activity.

The key issue at the moment in the Israeli marketplace is "liquidity", or more precisely, the lack thereof. Israel's big borrowers are facing the prospect of massive bond repayments due over the next couple of years, and are looking for ways to finance their obligations. The local banks cannot provide the answer, since in many instances the banks have reached the lending limits set down by the Bank of Israel for individual borrowers and borrower groups. The capital markets are not a viable alternative, since the current yields on the borrowers' outstanding bonds are so high that the borrowers have effectively priced themselves out of the market. Other than in the rare instances where foreign banks are ready and willing to lend to these Israeli corporate borrowers, the only immediate solution is to realize assets.

During the course of the last month we have seen The Suny Group sell back a controlling interest in the "Partner" mobile telephone company to Hutchinson of Hong Kong (from whom Suny purchased the company less than three years ago), and the IDB Holdings Group has agreed to sell a controlling interest in Clal Industries to the US-based Access Industries, controlled by Len Blavatnik. We anticipate more transactions of this nature as the pressure continues on Israeli conglomerates to turn balance sheet assets into cash.

Yet despite this trend among Israel investment groups, we view the willingness of overseas investors to acquire major assets in Israel as a clear sign of continued confidence in the Israeli economy.  Most recently, Facebook has announced another major acquisition in Israel, with its purchase of the face recognition start-up,

The trend toward increasing competition in marketplace and decreasing "overconcentration" has continued, with the joint publication last month by the Ministry of Finance and the Ministry of Justice, of a draft Law for Promotion of Competition and Reduction in Concentration.

In Unfolding we review all of the above developments, as well as an important piece of legislation governing the rights of commercial agents in Israel, an issue previously covered in general law and decisions of the courts.

We hope you find something of interest in this latest edition. Click here to read Unfolding: Israeli Market Developments.


Alan Sacks - head of HFN's M&A and Banking and Finance Departments

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