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Internet Gold Reports Financial Results for the Third Quarter of 2019

Ramat Gan, Israel, Nov. 18, 2019 (GLOBE NEWSWIRE) -- Internet Gold - Golden Lines Ltd. (the “Company” or “Internet Gold”) (NASDAQ Global Select Market and TASE: IGLD), a holding company whose principal asset is a 51.95% stake in B Communications Ltd. (“B Communications”)  (NASDAQ and TASE: BCOM), that owns 26.34% of the outstanding shares of Bezeq The Israel Telecommunication Corporation Limited, the leading communication group in Israel ("Bezeq") (BEZQ.TA), today reported its financial results for the third quarter of 2019.

In January 2019, the Company reported that because of its inability to generate funds by selling its ownership interest in B Communications, it intends to withhold payments to its debenture holders until further notice. As a result, the Company's long-term debt was classified as "short-term" debt.

The Searchlight Transaction

On June 24, 2019 the Company announced the execution of a definitive agreement (the “SPA”) among the Company, B Communications, Searchlight II BZQ, L.P. (“Searchlight”) and T.N.R Investments Ltd. (together with Searchlight, the “Purchasers” and the “Searchlight Transaction”).

The Searchlight Transaction provides for the sale by the Company of its entire holdings in B Communications for the aggregate sum of NIS 225 million and an investment by the Company in B Communications of NIS 345 million (consisting of the amount to be paid by the Purchasers for the B Communications shares held by the Company and an additional NIS 120 million). In consideration, the Company will receive NIS 310 million par value of Series C debentures of B Communications as well as 8,383,234 ordinary shares of B Communications.

One of the conditions to closing of the Searchlight Transaction is the receipt of court approval pursuant to Section 350 of the Israeli Companies Law, 5759-1999 (the “Arrangement”). On August 20, 2019, the court approved our petition to approve the Arrangement, following the approval of our creditors and shareholders.

On November 11, 2019 the Purchasers notified the Company that the Ministry of Communications has issued a control permit in Bezeq (the “Control Permit”) to the Purchasers. Issuance of the Control Permit is a condition to closing of the Searchlight Transaction.

The Company is currently in discussions with the Purchasers to finalize all remaining open items before the closing of the transaction. As of this date, the expected closing date of the Searchlight Transaction is December 2, 2019. There is no certainty that the transaction will be consummated.

Even if the Searchlight Transaction will be consummated, the Company will not be able to fully pay its debts, and it intends to initiate an additional creditors’ arrangement which will be submitted to the applicable Israeli court pursuant to Section 350. The Company anticipates that pursuant to such arrangement, the existing shares of the Company will be nullified and that contemporaneously the creditors of the Company will receive, among other items, 100% of the outstanding shares of the Company.

In light of the above, on October 6, 2019 the Company announced that it has been exploring potential strategic alternatives. These alternatives include the acquisition of a new business or a sale of the Company. Such a transaction will likely be subject to an approval by the Israeli court as part of a creditors’ arrangement. There can be no assurance that the exploration of strategic alternatives will result in any transaction or, if a transaction is undertaken, as to its terms, structure or timing.

Internet Gold’s Unconsolidated Financial Liabilities and Liquidity

As of September 30, 2019, Internet Gold’s unconsolidated liquidity balances of cash and cash equivalents and short-term investments totaled NIS 130 million ($37 million), its unconsolidated financial liabilities totaled NIS 770 million ($221 million) and its unconsolidated net debt totaled NIS 640 million ($184 million). 

(In millions)   September 30,     September 30,     September 30,     December 31,  
    2018     2019     2019     2018  
    NIS     NIS     US$     NIS  
                         
Series C debentures     22       23       7       22  
Series D debentures *     706       747       214       717  
Total financial liabilities     728       770       221       739  
                                 
                                 
Cash and cash equivalents     25       105       30       69  
Short-term investments     118       25       7       67  
Total liquidity     143       130       37       136  
                                 
Net debt     585       640       184       603  

* The outstanding balance of Series D debentures as of September 30, 2019 includes NIS 11 million ($3 million) arising from implementation of IFRS9. It should be noted that the increase in the outstanding Series D debentures balance will not increase the Company’s future debt repayments.

Internet Gold’s Third Quarter Consolidated Financial Results

Internet Gold’s consolidated revenues for the third quarter of 2019 totaled NIS 2.2 billion ($645 million), a 2.3% decrease from the NIS 2.3 billion reported in the third quarter of 2018. For both the current and the prior periods, Internet Gold’s consolidated revenues consisted entirely of Bezeq’s revenues.

Internet Gold’s consolidated operating profit for the third quarter of 2019 totaled NIS 416 million ($120 million) compared to operating profit of NIS 382 million in the third quarter of 2018.

Internet Gold’s consolidated net profit for the third quarter of 2019 totaled NIS 118 million ($34 million) compared to a net profit of NIS 168 million in the third quarter of 2018.

Notes:

Convenience translation to U.S. Dollars

Unless noted specifically otherwise, the dollar denominated figures were converted to US$ using a convenience translation based on the New Israeli Shekel (NIS)/US$ exchange rate of NIS 3.482 = US$ 1 as published by the Bank of Israel for September 30, 2019.

About Internet Gold

Internet Gold is a telecommunications-oriented holding company whose principal asset is a 51.95% stake in B Communications Ltd., the owner of 26.34% of outstanding shares of Bezeq The Israel Telecommunication Corporation Limited, the leading communications group in Israel. On June 2019, Internet Gold entered into a transaction for the sale of its entire holdings in B Communications Ltd. For more information, please visit the following Internet sites:

www.igld.com
www.bcommunications.co.il
www.ir.bezeq.co.il

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties including statements regarding completion of the Searchlight Transaction. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the risk that the Searchlight Transaction will not close for any reason, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in the Company’s filings with the Securities Exchange Commission. These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statement.

There is no certainty that the Searchlight Transaction will be consummated. In addition, there can be no assurance that the exploration of strategic alternatives will result in any transaction being consummated

For further information, please contact:

Doron Turgeman
doron@igld.com / Tel: +972-3-924-0000   

 Internet Gold - Golden Lines Ltd.

Consolidated Statements of Financial Position as at

(In millions)

 

    September 30,     September 30,     September 30,     December 31,  
    2018     2019     2019     2018  
    NIS     NIS     US$     NIS  
Current Assets                                
Cash and cash equivalents     1,584       1,356       389       1,173  
Investments     2,041       1,867       536       1,847  
Trade receivables     1,792       1,746       501       1,773  
Other receivables     313       319       92       272  
Inventory     86       94       27       97  
Total current assets     5,816       5,382       1,545       5,162  
                                 
Non-Current Assets                                
Trade and other receivables     423       442       127       470  
Property, plant and equipment     6,924       6,072       1,745       6,313  
Intangible assets     5,257       3,219       924       4,227  
Deferred expenses and investments     569       503       144       509  
Broadcasting rights     470       63       18       60  
Right of use assets     1,434       1,141       328       1,504  
Deferred tax assets     1,041       19       5       1,205  
Investment Property     140       -       -       64  
Total non-current assets     16,258       11,459       3,291       14,352  
                                 
Total assets     22,074       16,841       4,836       19,514  

 Internet Gold - Golden Lines Ltd.

Consolidated Statements of Financial Position as at

(In millions)

 

    September 30,     September 30,     September 30,     December 31,  
    2018     2019     2019     2018  
    NIS     NIS     US$     NIS  
Current Liabilities                                
Bank loans and debentures     2,121       4,314       1,239       4,724  
Leases liabilities     443       427       123       445  
Trade and other payables     1,631       1,639       471       1,714  
Dividend payable     234       -       -       -  
Current tax liabilities     16       22       6       8  
Provisions     106       143       41       175  
Employee benefits     330       365       105       581  
Total current liabilities     4,881       6,910       1,985       7,647  
                                 
Non-Current Liabilities                                
Bank loans and debentures     13,009       9,393       2,697       9,637  
Leases liabilities     1,024       988       284       1,106  
Employee benefits     266       539       155       445  
Other liabilities     212       178       51       175  
Provisions     40       39       11       38  
Deferred tax liabilities     446       112       32       302  
Total non-current liabilities     14,997       11,249       3,230       11,703  
                                 
Total liabilities     19,878       18,159       5,215       19,350  
                                 
Equity (equity deficit)                                
Attributable to shareholders of the Company     60       (967 )     (278 )     (453 )
Non-controlling interests     2,136       (351 )     (101 )     617  
Total equity     2,196       (1,318 )     (379 )     164  
                                 
Total liabilities and equity     22,074       16,841       4,836       19,514  

Designated Disclosure with Respect to the Company’s Projected Cash Flows

In connection with the issuance of the Series D Debentures in 2014, we undertook to comply with the “hybrid model disclosure requirements” as determined by the Israeli Securities Authority and as described in the prospectus governing our Series D Debentures.

This model provides that in the event certain financial “warning signs” exist, and for as long as they exist, we will be subject to certain disclosure obligations towards the holders of our Series D Debentures.

As aforementioned, in January 2019, the Company reported that because of its inability to generate funds by selling its ownership interest in B Communications, it intends to withhold payments to its debenture holders until further notice.

As described above, on June 24, 2019, the Company entered into the Searchlight Transaction. Even if the Searchlight Transaction is consummated, the Company will not be able to fully pay its debts, and intends to initiate an additional creditors’ arrangement which will be submitted to the applicable Israeli court pursuant to Section 350 of the Israeli Companies Law. The Company anticipates that pursuant to such arrangement, the existing shares of the Company will be nullified and that the creditors of the Company will receive100% of the shares of the Company and other consideration.

Our unconsolidated unaudited cash flow statement for the quarter ended September 30, 2019 reflects, as expected, a continuing negative cash flow from operating activities of NIS 2 million. In addition, the Company’s unconsolidated unaudited statements of financial position as of September 30, 2019, reflect that the Company had an equity deficit of NIS 967 million and negative working capital of approximately NIS 640 million as of such date. The negative working capital is a result of the classification of the Company’s long term debt as “short-term” debt.