Israel Electric Corp Ltd:New issue thoughts

According to Bond Radar, Israel Electric (ISRELE), has announced it will issueSr. secured benchmark-sized 144A/Reg-S USD-denominated bonds with 10.5years maturity. The bonds would be part of the company’s global mediumtermnote program, follow NY law and will be traded on Tel Aviv StockExchange. The bonds are expected to be rated Baa2 by Moody’s and BBB byS&P, similar to ISRELE’s other Senior secured Eurobonds. This will be ISRELE’sfirst USD issuance since Nov-2014 when they issued 5% USD1.25bn bondsdue in 2024. The IPT has come out at T+187.5bps area with book openingduring today's business. At this IPT, it translates into a coupon of around4.65%. We provide our initial thoughts on valuation below.

    Use of proceeds and valuation thoughts – ISRELE have three USD bondstotaling USD1.875bn due in the next one year and two of them worthUSD875mn are due in 2018 alone. We expect the proceeds from this issuanceto be utilized towards repaying ISRELE’s 5.625% USD750mn bonds due inJune 2018 and USD125mn bonds due in July 2018. We present followingrelative value scenarios to assess the fair value of new ISRELE ‘28s.