Offering Cancelled: Former Ambassador Danny Ayalon Misses Out on Millions in Commissions

Recently, investors in Tel Aviv have received several reminders of the risks involved in investing in debt issued by foreign companies (BVI). A series of negative events linked to these entities, most notably the collapse of the summer camp company Cimed, has cast a heavy shadow over the entire sector.

Now, the repercussions of these events are beginning to impact the local market. At the beginning of the week, the American real estate company Eagle Properties decided to withdraw from a planned debt raise on the Tel Aviv Stock Exchange. This came after the company, which holds a portfolio of approximately 24 office properties, published a prospectus last June in preparation for the issuance of its first series of bonds, totaling about 500 million shekels.

After the company had already completed its presentation process to institutional investors ("road show"), the Cimed affair erupted and shuffled the deck. In that case, the controlling shareholders of the summer camp company, the Shabsales brothers, siphoned approximately 100 million shekels from the company's coffers into their own pockets, leading to its collapse. The event caused a stir in the capital market and drew harsh criticism of the conduct of all involved, from the underwriters who took the company public to the regulator (Israel Securities Authority) and the institutional investors who backed it.

"Market conditions today for BVI companies are not favorable," says a senior market source who facilitates foreign company offerings. "Since the Cimed events, investor appetite has decreased and spreads have risen significantly. This has become less attractive for companies, forcing those who have already begun the fundraising process to postpone their plans."

Consulting Fees of 10 Million Shekels

Among those likely disappointed by the cancellation of the Eagle Properties offering is Danny Ayalon, former Israeli Ambassador to the US and Deputy Minister of Foreign Affairs. Ayalon accompanied the intended offering through the investment firm Silver Road Capital, which he founded in 2017 alongside Lior Maimon, a specialist in assisting international companies entering the Israeli capital market.

Ayalon, alongside the underwriting firm Eximus Capital from the First International Bank group, was expected to earn consulting fees totaling 10 million shekels had the deal been completed. It is worth noting that, in line with customary practices for BVI company offerings in Israel, consulting and underwriting fees are relatively high. They typically range from 2%–3% (and sometimes up to 4%) of the offering proceeds, compared to 0.4%–1.5% for Israeli companies.

However, sources familiar with foreign offerings estimate that BVI companies will return to raise debt on the local market: "I am certain that appetite will return, but it will likely be different than before. All deals will be structured with collateral, higher ratings, and deeper due diligence to minimize the chance of events like Cimed repeating. I firmly believe that when conditions normalize, companies will return to raise funds in Israel."