Tamar Raises $650mn in Bonds

Tamar Petroleum raised $650mn in an Israeli market bond offering, it said July 6, while demand was for twice that sum. The interest rate was fixed at 4.69%. Upon completion of the public stage, planned for July 13, the Series A bonds will start trading on the Tel Aviv Stock Exchange (TASE).

This is the first stage of creating a special-purpose company which will buy 9.25% of Delek Drilling's stake in the Tamar reservoir. Israeli credit rating agency Midroog assigned the bond a rating of 1A with a stable outlook.

The second part of the offering includes an equity raising from local and foreign investors in the coming two weeks, when Tamar Petroleum shares will be traded on TASE. Yossi Abu, Delek Drilling CEO, will be the chairman and its CEO will be Liam Vaisman on an annual basic salary of $340,000. So Delek will retain  influence and is expected to remain the biggest shareholder in the new company.

Opposition to the deal

In the days leading to the bond issue a top opposition politician, Shelly Yechimovich, from the opposition Labor party, wrote to institutional investors, warning them not to take part in the bond issue and the shares sale. "The value of the issue is derived from a price that is a monopolistic, unrealistic price, in which one heat unit [referring to the price/mn British thermal units] is sold for nearly $6, while its price in the market, even if we exaggerate, is $2. This is an inflated price, when even [gas from] Karish and Tanin is sold for $4.5."

Psagot one of the biggest institutional investors in Israel also opposed the bond issue and did not take part in it on the grounds that not enough details were published on the offer.

By selling down 9.25% stake in Tamar, Delek Drilling is fulfilling the first phase its shareholding liquidation in Tamar which was imposed by the Regulatory Natural Gas Framework, adopted by the Israeli government last year.

Following the expected completion of the share sale in two weeks' time, Yitzhak Teshuva, the controlling shareholder in Delek Group, is expected to a windfall of about NIS 1bn ($280mn) in dividends.

Ya'acov Zalel