In a zero interest rate environment and before the start of the last wave of interest rate increases in the markets, investors in the capital market really had to make an effort to get a return. And in order to achieve it, they were often tempted to invest in risky assets (shares and bonds of weak and/or unrated companies and/or high-risk companies). In the last wave of declines, quite a few of those investors suffered a sharp drop in the value of high-risk investments, and the horizon ahead is not necessarily visible Optimistic. Some of those high-risk companies will not be able to raise-roll their debt, the capital market is closed to them, and they may already in the short term encounter substantial difficulty in rolling over the debt.
Today in the era of rising interest rates (And a return to sanity. Yes, 0 interest is not normal) It seems that you no longer need to be excessively exposed to risk assets in order to obtain a good return in the medium-long term. But, if you ask the investors, they will tell you that today the environment is dangerous. But it was also dangerous before only that in a zero interest rate environment you did not receive a return that would reflect the risk you took and today you receive a decent return and sometimes even beyond that.
Solid risk-averse investors today have many avenues to invest their surplus funds in. Deposits, MCM of the Bank of Israel, financial funds and also bonds.
The position of most analysts and forecasters today is that the interest rate of the Bank of Israel, which has not yet reached its peak, will begin to decrease towards the end of the year. If you believe that this is the direction of the markets, then investing in assets for a short period (deposits, mutual funds, financial funds) can, in my opinion, be nice in the short term, but be an unattractive direction of investment in the medium to long term, because when the rollover point of the deposit/equity arrives, you may receive a lower interest rate.
So for the solid investor who is looking for medium-long term investments and who is not excited “Background noises” (fluctuations) in the short term, in my opinion, today is an excellent time to buy bonds for long, even very long periods. Simply “marry” the current interest rate for as long a period as possible. That way you can achieve a great long-term return on investments and not just for one year or two years. And that the interest rate Go down (if you go down), these are the solid assets that will probably go up the most.
Bug“H. All the investor needs and wants is for the company to return all the money to him and on time. He has no upside beyond the yield according to which he purchases the bonds. And this, as mentioned, is different from shares. Therefore, my clear preference is to invest in bonds with collateral/encumbrance on a quality asset, and if possible on the road then let it be a strong company and if it also has a management/controlling owner that is even better. Such an investment guarantees you a second way out, in case the issuing company getting into difficulties
Experience has taught me that even companies that appear at a certain point in time to be strong and durable empires (Idibi and the late Africa Group) can do nonsense, take increased risks and end the company due to excessive leverage and bad investments purchased at record prices during optimistic times. Therefore, A first lien on a quality and strong property gives the investor additional protection and a way to secure the investment. In addition, over the years it seems that assets of this type enjoy a relatively low standard deviation and maintain a relatively low margin compared to government bonds, even in crises.
For example, you can look at the bonds of G. City (formerly Gazit Globe) of Haim Katzman. The company has many bond series, most of which are currently trading at very high yields that express investors’ concern about the state of the company as well as the significant financial and business difficulties it is currently facing in the various activity markets. Despite this, one series surpasses all of them and trades at a relatively low yield and not far from the yields of Bonds with collateral from other companies (including companies in the higher rating groups) This is Series T which is backed by a first lien on the Rothschild Mall in Israel and trades at only 215 margin points against a government bond at a similar rate.
G City Agag To
So in the current period and in the uncertainty that exists in the markets, here are a number of bonds that I find interesting for investment for the solid investor. I tried to choose from different fields, although today most of the bonds backed by collateral are from companies in the real estate field. The analysis carried out below is only based on publicly available information and without discussion with the mentioned companies. In total, I chose to present 8 bonds, with a table below that aggregates the data on the series. Let’s start with the torches:
Lapidot Capital Agagh A
Lapidot Capital is an investment company that controls, among other things, Africa Residences, Dania Sibus, Sunny Communications and Lapid Haletz. The bond is backed by a first lien on the shares of Sunny, which markets Samsung devices in Israel. Yaakov Luxenburg’s Lapid Group (Loxy) has proven throughout its years of activity that it knows how to make the right financial and business moves in high times and buy assets at bargain prices in times of crisis. It seems that Luxi does not let “fads in the capital market” confuse him and he sticks to clear economic values in his investment decisions and not to dreams or fantasies.
Furthermore, it seems that the group arrived very prepared for the current negative cycle in the markets with high liquidity and low debt at the company level as well as at the level of the subsidiaries, the vast majority of which are strong, cash-flowing, profitable companies, which also distribute handsome current dividends to the torchbearers.
Agh torches
Priortech Agagh A.
A solid company in the technological field with professional management that invests mainly in companies in the semiconductor field. The bond series has a first lien on the shares of the dual company Camtech (which currently trades at a value of approximately NIS 4.5 billion and which is engaged in the development, production and marketing of systems to improve and optimize the semiconductor industry). Camtech is a financially strong company (with significant cash surpluses) and a leader in its field .
Universal Agah H
The company is engaged in the import and sale of vehicles “Chevrolet”, “Cadillac” and “Isuzu” providing garage and spare parts services, leasing and renting of vehicles under the “Avis” brand. In the last two years, in light of the shortage experienced by the automotive world, the company presented record results with a cumulative net profit of approximately NIS 750 million. The bond series benefits from a first lien on vehicles and pays interest and principal every quarter.
Melisron Agach K.
Melisron is a leading local real estate company controlled by Liora Ofer. The company is the owner and operator of shopping centers and office spaces on a significant scale throughout Israel. In addition, the company has recently increased its activity in the residential market. In recent years, the company has shown controlled growth in its operations, focusing on prime assets and maintaining its financial strength. The Hague series“H” is backed by a first lien on the Haifa Grand Mall. One of the strongest commercial centers in the Haifa region and the north (Full Disclosure. In the distant past I served as the director of the capital market activity at Melisron)
Arport City Agah 11
Just recently Arport City performed for the first time in its life (to the best of my recollection) a public bond issue backed by a first lien on yielding assets. Despite the challenging period in the capital markets, the issue received particularly high demand from investors. Arport City is one of the strongest companies in the yielding real estate market with a high rating of AA and if you add a lien to that For a yielding asset, you get bonds with a low level of risk. In my eyes, the main risk in bonds is its long interest rate, and this, as mentioned, if we continue to see an increase in the current interest rate environment, and of course if the company decides to expand significantly and increase the financial or business risk.
Villar Agach Y.
Over the years Villar has been considered one of the real estate companiesIt yields the most solid shares. It operates with very low net leverage and high liquidity and grows in a conservative and responsible manner. Some would say too conservative. Will the current management maintain the conservative line of Shlomo Tiser Z“Only time will tell. What is certain is that the company’s Y bond series with a first lien on yielding real estate guarantees the solid investor peace of mind even if the company decides to grow at a faster rate or if it enters new areas with higher risk levels.
Villar Agah
Samit Agach H.
The Summit company grew under the leadership of Zohar Levy in an impressive manner throughout the years of its activity, all while maintaining a high level of financial strength. In addition, Zohar Levy has proven over the years that he has sharp business sense that knows how to make smart aggressive moves and that he does not fall in love with any investment. Summit has a diversified real estate activity in Israel in the USA and Germany as well as an investment in Paz shares, which at least to me seems less suitable for the company’s core activity.
The Agah 8th series is the highest rated among the Agah series“H” is backed by a first lien on assets (AA+) and expresses the relatively low risk of the series, which is backed by a number of yielding assets with relatively low leverage.
Ari NedelSeries A bonds
Ari Real Estate is a real estate company controlled by Tzachi Abu. From the date of the transfer of control, the current owner of the company has been working vigorously to expand its activities as well as to improve the properties it owns. It should be noted that until now the controlling owner of the company has worked for the company to expand its activities while maintaining its financial strength (by simultaneously carrying out share capital raisings).
After the controlling owner operated privately for many years, from the moment the public format was discovered, he operates through another public company (Gefen – specializing in housing and urban renewal) and is also considering investing in a third public company from the field of non-bank credit. In my opinion, it is necessary to monitor the conduct and make sure that the controlling group does not lose focus, which in my opinion may increase the risk of investing in the group. In any case, investing in bonds gives the investor relatively strong security and this in light of the fact that it is backed by a large and powerful asset in the city of Ashdod (Star Center), without (for now) exhausting its leverage potential.
the writer Serves as owner and CEO of YMLA Consulting and Investments, which specializes in consulting and accompanying companies on capital raising issues, issuances, consulting and accompanying credit rating procedures, investment banking, financial and business consulting.
The above should not be seen as a recommendation to carry out actions and/ or investment consulting and / or investment marketing and / or consulting of any kind. The information presented is for information only and is not a substitute for advice that takes into account the data and the special needs of each person. Anyone who makes any use of the above information – does so at his own discretion and sole responsibility. The company and/or the writer owns and/or may own some of the papers mentioned above.
