Petrochemical CompanyTurned toloyal The bondholders request to defer interest payments of NIS 24 million for nine months, which are due to be made at the end of the year. September 2021.
Petrochemicals, whose entire activity is a 15.5% holding in Bazen, proposes to add a clause to the trust deed. According to him, as long as dividends are received from Bazan, They will be used shortly after their receipt to advance the interest payment it seeks to defer. In addition, NIS 1.7 million of the amounts deposited by the trustee will be transferred immediately to the holders of C bonds.
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Petrochemicals, run by Rafi Arad, attribute the inability to service the debt on time to the economic crisis caused by the eruption of the corona. The crisis has led to considerable volatility in gas and oil prices in the energy market, and to damage to Zen results. This translated into a sharp decline in the stock of Zen on the stock exchange, which has lost about 58% since the beginning of the year. The decline in Bazen leads to a significant erosion in the collateral ratio to the debt of petrochemical bonds, which are secured by a lien on shares in Bazen.
Another factor that makes it difficult for petrochemicals to meet its obligations on time is a waiver signed between Bazan and banking corporations that provide it with long-term financing, as part of a syndication agreement. According to it, the banks agreed to a temporary change in the terms of the loan in the form of providing relief in the financial criteria. However, Zen was required to repay the banks, and therefore undertook that the distribution of dividends during 2020 would be subject to their prior written approval. This commitment creates uncertainty regarding petrochemical sources.
Petrochemicals ‘debt to its bondholders amounts to NIS 1.3 billion. Petrochemicals’ bonds are traded at a junk yield of up to 140%.
Petrochemicals’ request to defer interest payments should not surprise its bondholders. Petrochemical carries on its back a live business note, which attached to its reports the accountants in the absence of sources for its debt service. Already in the first quarter reports, the company explicitly stated in relation to the interest payments to be made at the end of the year: “The trustees of the bond series have deposits in insignificant amounts, and the company does not have liquid financial resources sufficient for these repayments.”