Bank Hapoalim (TASE: POLI) has decided to halt its NIS 3.2 billion debt offering scheduled for the coming days. The bank will wait for a calmer time.
The offering, which Poalim IBI Underwriting and Investments would have led, was postponed, as far as is known, due to the upheaval on the bank's board of directors, which last week culminated in the resignation of chairman Yair Seroussi and the appointment of Adv. Oded Eran in his place. Furthermore, Bank Hapoalim has no urgent need for money.
Two offerings were planned. The first was an offering of up to NIS 2.5 billion in two new bond series (Series 35 and 36), rated AAA by S&P Maalot and Aaa by Midroog. The second included an offering of up to NIS 700 million in deferred notes (Series G), with a mechanism for absorbing losses on the principal (contingent convertibles - COCO) through partial or complete write-offs. These bonds, classified as Tier-2 equity, had lower ratings: AA by S&P Maalot and Aa3 by Midroog.
The reason is that the debt is subordinate to ordinary bonds, and is also likely to absorb complete or partial write-offs of the principal. The Midroog report states that the COCO offering planned by the bank are subject to full or partial writing off if the ratio of Tier-1 equity falls below 5%, and to a total write-off if the Supervisor of Banks decides that an event has occurred threatening the bank's existence.
The expected exit of Serioussi followed a complaint by a former bank employee that former Bank Hapoalim CEO Zion Kenan sexually assaulted her a decade ago, following which Seroussi's handling of the affair aroused criticism. Seroussi failed to report the event to the Bank of Israel or the Bank Hapoalim board of directors. In consultation with the bank's legal advisor, it was decided to appoint Judge (ret.) Steve Adler as external arbitrator to hear the case. While Adler found that no sexual harassment had occurred, he recommended that the employee be granted extra severance pay.
Eran's appointment as chairman will become effective at the beginning of 2017, and he will probably carry out the planned offerings. At the same time, he is likely to wait until Supervisor of Banks Hedva Ber publishes her report on how Bank Hapoalim handed the complaint against Kenan under Seroussi's leadership as chairman.
Published by Globes [online], Israel business news - www.globes-online.com - on December 4, 2016
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