The financial irregularities in the company Backing up holdings , and the fear that the non-bank credit company would not be able to recover bad debts amounting to tens of millions of shekels, caused the company’s stock to drop by about 90%. At the same time, the concern raised this week by the company’s chairman and controlling owner, Yonatan Cohen, that the company would not be able to redeem the bonds it issued on time, led to a drop in the price of its two series of bonds, leading them to trade at a three-digit yield.
Following the abnormal yield, at the beginning of the week the Midrog company lowered the rating of the two series – A and B – for the second time in recent weeks. For the mutual funds of the Moore and Harel investment houses, this was one downgrade too many, and the bonds, which until the last few days were rated at an investment-friendly rating, became the owners of a rating lower than “investment rating”.
The investment houses, who probably won’t be the only ones, stated that the investment policy of the funds that own the series includes a clause according to which the funds will not create exposure to bonds that are not investment rated. Therefore, they announced their intention to sell the bonds within three months from the day their rating was downgraded. Bamore added that the sale will be carried out as much as possible under the circumstances created around the backing of holdings. But it may be difficult to do this if a backup is not recovered and it is not possible to find buyers for the goods.
As mentioned this week, it became clear that the debt of backing to its bond holders is in danger, and that it will have difficulty meeting the repayments of the debt it raised from the public (bonds totaling more than NIS 130 million). This is in view of financial irregularities discovered in the company, and bad debts of at least NIS 40-50 million that it is expected to absorb due to problematic conduct in its northern branch.
Backing Holdings is required to redeem in December the bonds it issued from series A in the amount of NIS 10 million, and it stated that the payment at that date is conditional on its ability to reach agreements with the banking entities that provided credit to the company. Regarding series B, which is due in December 2025, the balance The debt is NIS 127 million, and in light of the state of the backup, it is doubtful whether you will be able to repay it even at this late date.
Midrog, which this week lowered the rating of the backing bond to Ba1, and put it under review with negative consequences, stated that “in our estimation, there is a fear of an expected violation of financial standards vis-à-vis the various financiers, in a way that increases the likelihood of default.
“In addition, the downgrade reflects a significant erosion in the liquidity profile, in accessibility to funding sources and in financial flexibility, which is reflected in the lack of additional free credit frames to be utilized with the banking system. This, to the extent that increases the speculative characteristics of the company’s credit risk profile and the likelihood of default.”