Has Midroog opened up the possibility of the removal of the going concern qualification from energy company Delek Group’s financial statements? For the first time since the coronavirus pandemic broke out, rating agency Midroog, of the Moody’s group, has announced that it is resuming rating of Delek Group, controlled by Yitzhak Tshuva, and has updated its rating for the company to Baa3.il (equivalent to BBB-).
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Midroog states that there has been an improvement in Delek Group’s financial flexibility, among other things thanks to a reduction in its debt, the raising of equity capital, improvement in the values of its assets, and the following wind provided by the sharp rise in the price of oil. This, Midroog says, was seen in the company’s ability to return to the capital market and raise secured debt through its 35 and 36 series bonds.
Midroog also points out that Delek Group has obtained sources for most of the capital repayments it is due to make by the end of 2022.
Despite the dramatic improvement in Delek Group’s oil and gas business, reduction of its liabilities, and rising share price, its financial statements still carry a going concern qualification from its auditors, reflecting fears over the company’s ability to service its debt in the near term. The qualification first appeared in Delek Group’s financial statements for 2019, released in April 2020.
In the financial statements for the second quarter of 2021, released on August 26, the auditors, from Brightman Almagor Zohar & Co. (Deloitte Israel), cite three main reasons for the qualification: a deficit on working capital, large payments due to creditors, chiefly bondholders, and financial covenants that enable the bondholders to present the entire debt for repayment in April 2022 unless Delek Group’s credit rating rises to at least BBB- by that time.
Published by Globes, Israel business news – en.globes.co.il – on November 24, 2021.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.
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