Today, Capital Market Supervisor, Mr. Yadin Antebi, and the Chairman of the ISA, Professor Zohar Goshen, have published clarifications regarding the options open to insurance companies, provident funds, pension funds and mutual funds for debt refinancing.
Following the word financial crisis, more and more Israeli corporations, that had raised capital from the public, find it difficult to meet the conditions debt repayment. At the same time there are growing signs that more and more companies might default on their repayment obligations.
This situation requires institutional entities, insurance companies (as far as dividend sharing policies are concerned), provident funds, pension funds and mutual funds (particularly due to the funds trust obligations toward their investors), to take both joint as well as independent actions to collect the debt or in some cases to reach debt settlements with the creditors.
Debt settlements entail costs to be carried by managing institutional investors, members of bodies representing bond’ holders of the borrowing corporations, managing the process opposite the borrower. All that at the time there is no certainty that the aforesaid costs will be settled with the creditors.
The abovementioned clarifications stipulate the terms, compliance with which will allow managing institutional investors to settle expenses from the dividend sharing insurance policies, provident funds, pension funds and mutual funds under their management, including:
1. Managing institutional investor carrying expenses in the sum not lower than the sum to be repaid from insurance policies, provident funds, pension funds and mutual funds, accordingly.
2. Expenses repaid from the policies, provident funds, pension funds and mutual funds are reasonable relative to the value of their bond’ holdings and to not exceed 1% from the aforesaid value.
3. Managing institutional investor must act to return the expenses and the repaid expenses shall be returned and divided between the managing institutional investor and insurance companies, provident funds, pension funds and mutual funds according to their relative share in the aforesaid expenses.