Ma'alot Upgrades Shikun & Binui Bond Rating to A+ Ahead of Debt Refinancing

The Israeli rating agency Ma'alot has raised the bond rating of Shikun & Binui from A to A+ in anticipation of a 350 million shekel expansion of the company's Series 11 bonds as part of a debt refinancing effort. Analyst Ayelet Matzov highlighted two recent asset sales by Shikun & Binui: the sale of Shikun & Binui Energy to Generation Investment Management for 4.45 billion shekels, and the sale of a 40% stake in student dormitories in Tel Aviv to Migdal and Tel Aviv University for 85 million shekels. These transactions, especially the energy sale, will significantly reduce Shikun & Binui's solo debt. The company expects to receive 2.8 billion shekels from the energy sale and 230 million shekels from the dormitories sale.

Matzov noted that these moves reflect Shikun & Binui's strategy to focus on core activities and reduce leverage. Analysts Matzov and Yevgeny Silishtyan also pointed to the company's historic land assets valued at 6.3 billion shekels, which are geographically diversified and have appreciated over time. The sharp increase in the value of Shikun & Binui Energy and the strategic focus, combined with a financial policy aimed at lowering leverage, have improved the expected debt recovery rate, leading to the bond rating upgrade.

The analysts estimate that in a hypothetical default scenario, possibly triggered by a deep recession in the economies where the company operates, along with rising unemployment and Bank of Israel interest rates, the debt recovery rate would range between 70% and 90%. Meanwhile, Shikun & Binui's stock, managed by Amit Birman, declined by 0.7% in trading and is currently valued at 9.7 billion shekels.