Business Context and Reporting Period
Company: FORMULA SYSTEMS (1985) LTD.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: August 5, 2024
Context: The filing discloses the publication of a draft agreement for a potential new series of secured, non-convertible debentures (Series D) in Israel and the issuance of credit ratings for this potential offering.
Key Financial Metrics and Debt Structure
The filing does not provide current revenue, profit, cash flow, or margin data. It focuses exclusively on the proposed terms of the Series D Debentures:
- Proposed Aggregate Principal: Up to NIS 150 million (par value).
- Security: First lien on shares of publicly-traded subsidiaries (Matrix IT Ltd., Sapiens International Corporation N.V., and Magic Software Enterprises Ltd.).
- Loan-to-Value Ratio: Not to exceed 60% of the value of pledged shares.
- Repayment Schedule:
- Seven equal annual payments of 12% each from December 1, 2027, through December 1, 2033.
- Final principal repayment of 16% on December 1, 2034.
- Interest Payments: Initial payment on December 1, 2024; subsequent semi-annual payments on June 1 and December 1 from 2025 through 2034.
Material Changes and Credit Ratings
Standard & Poor’s Maalot and Midroog (an affiliate of Moody’s) issued credit ratings for the potential Series D Debentures and reaffirmed the company's corporate credit rating:
- Series D Debenture Ratings: ilAA- (S&P) and Aa3.il (Midroog).
- Corporate Credit Ratings: ilAA-/stable (S&P) and Aa3.il/stable (Midroog).
- Comparison: These ratings echo the ratings for Formula's existing Series C Debentures and the issuer itself.
Outlook, Risks, and Contingencies
Contingencies: The actual offering and publication of the final indenture are subject to:
- Approval by the Company's board of directors.
- Approval by the Israel Securities Authority (ISA).
- Approval by the Tel Aviv Stock Exchange (TASE).
Regulatory Restrictions: This filing is not an offer of securities in the United States. The offering is intended solely for residents of Israel and will not be registered under the U.S. Securities Act of 1933. It will not be offered to U.S. persons absent an applicable exemption.
Investor Verification Checklist
- Confirm whether the Board of Directors, ISA, and TASE have granted final approval for the Series D offering.
- Verify the final number of pledged shares in subsidiaries (Matrix IT, Sapiens, Magic Software) once the loan-to-value ratio is applied.
- Monitor the publication of the final-form indenture to confirm interest rates and any changes to the repayment schedule.
- Review the company's existing debt load to assess the impact of the potential NIS 150 million addition to total liabilities.