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Delek Nadlan Bonds – Speculate on Tshuva’s Image

Last updated on 2016-03-12

Delek Nadlan‘s short duration bonds are selling at a nice discount lately:

With the current low yields in the general bond market, this seems like a strange opportunity. But why are these bond “cheap”? The answer to that is easy: the company is loosing money, has more debt than assets and in general, is not doing well.

So… Why buy such securities? One reason: Tshuva. The controlling shareholder of the company is Mr. Itshak Sharon, a.k.a. Itshak Tshuva (50.78% directly and some 5% more indirectly). As you know, Mr. Tshuva found some gas on the shores of Israel, and he will be getting a LOT of money from these projects in the next couple of years. He is currently battling (with all of the other “gas tycoons”) with the government for reduced taxes (lately loosing, but I don’t think that will make him less of a millionaire).

Anyway, what I’m saying is that Mr. Tshuva won’t let Delek Nadlan crash and burn, at least not now, and specially not for small debts like the bonds above. Maybe in a couple of years, but not now. He won’t let his image get dirty just because of 50 million dollars.

Disclaimer: Long on DLKR.C3.

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