The bond alternative is a unique proposition to tap into capital overseas, and many of the largest real estate investment groups in New York have been taking advantage and making the news. What many may not be aware of is that there are a multitude of smaller companies who have been successfully listed on the Tel-Aviv Stock Exchange. There are many reasons justifying the excitement over these bonds on both sides of the issuance. For Israeli investors, it affords them the opportunity to invest in United States-based investment grade assets, something that due to the overall size of the Israeli economy, and physical size, are lacking domestically.
For the United States Issuer, the possibilities are endless. Mid-B rated U.S. companies achieve A- and above ratings in Israel due to economies of scale, allowing for sub-5% bond issuances in Israel, with very few restrictions on use of the capital and no recourse. Although the first transaction could take up to four months, successive transactions can take as little as 48 hours, allowing for extensions to the first raise in short order and additional raises based on increased cash flows of assets originally placed in the bond portfolio or the pledge of additional assets over time prior to any successive raises. Some of the most alluring terms of the bonds are that it is attractively priced non-secured debt, flexible use of proceeds with lenient covenants, and the establishment of an effective platform to raise capital for future finance needs. Long term bonds with the opportunity to extend the raise after the initial six months allow investors to capitalize on an international market with a desire to invest into local real estate.
Berko & Associates is currently underway navigating the process alongside our esteemed clients and our Israeli partners and are excited to pave the way and underwrite a structure that is completely compatible with the needs of our clients.