Chaim Katzman meets pressure with rights issue, asset sale

Chaim Katzman has responded to pressure by investors, manifest in the declining prices of securities of the companies he controls. Norstar (TASE: NSTR) reported on Monday that it planned to raise NIS 65.7 million (gross), after seeing its credit rating cut last week.

Norstar is the holding company through which Katzman controls international income producing real estate company G City (TASE: GCT). G City (formerly Gazit Globe) itself reported yesterday that it had signed a binding agreement for the sale of the Copernicus commercial center and adjacent land in Torun in northern Poland for €127 million (NIS 449 million) gross. The buyer is Nepi Rockastle, and the deal is due to be completed by the end of 2022. The asset is being sold at a discount of 3.3% on its book value, and the net proceeds to G City will total NIS 433 million.

G City’s management said that this was the first of three assets marked for sale in Europe. MOUs for the sale of these assets for total of NIS 1.1 billion were signed last month.

Katzman, founder and CEO of G City, said, “Under our strategy, we shall continue to act vigorously to sell assets.” G City’s share price has responded by rising sharply over the past two sessions.

As mentioned, Norstar is raising capital, through a rights issue at NIS 12.05 per share, representing a 22% discount on the market price at the time of the decision. Katzman, who holds 28% of Norstar, has stated that he will take up his full rights, which means that he will inject NIS 18.6 million into the company.

The second largest shareholder in Norstar is real estate developer Canada Israel, controlled by Barak Rosen and Asaf Tuchmair, with 22%. Canada Israel made moves to take over Norstar earlier this year, and is currently showing a loss of over NIS 200 million on its investment.

Norstar’s main asset is its 51.5% stake in G City, currently worth NIS 926 million. The company owes its bondholders NIS 753 million (adjusted net present value).

Because of concerns over the company’s high leverage, G City’s share price has fallen about 50% in the past three months, while Norstar’s share price has fallen 58% during that period and the yield to maturity on its series 11 bonds rose to over 40% before the announcement of the rights issue, since when it has fallen to 25%.

Last week, Midroog downgraded its rating for Norstar’s debt from A2 to A3, thereby coming into line with S&P, which gives Norstar an A- rating.

Published by Globes, Israel business news – – on November 16, 2022.

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