Oil Refineries announces outline to ensure stability of Carmel Olefins

Oil Refineries Ltd., Israel's largest integrated refining and petrochemical group, announced on May 16, 2013 that it has presented an outline to ensure the stability of its subsidiary, Carmel Olefins (CAOL). The published outline, which will be put to the vote at a meeting of ORL and CAOL debenture holders, is intended to ensure both stability and control during the subsidiary's repayment process. As part of the agreement ORL will issue to the debenture holders and the banks a guarantee for repayment of the principal of CAOL's liabilities for two years, which stand at approximately US$135 million. If ORL's position is accepted, the provision of a guarantee to CAOL's debenture holders will also benefit ORL's debenture holders since in return the CAOL debenture holders will waive their rights, during the applicable period, to force the immediate repayment of CAOL's debt in the event that its debentures are downgraded. Such a step would likely negatively impact on the Company and, as a result, on the Company's debenture holder. In accordance with its policy of realizing the full potential from the Group's merger, ORL sees in the current move the first step in an arrangement (subject to the agreement of its and CAOL's creditors) whereby it would take upon itself CAOL's debts. In ORL's opinion, taking on the debt as stated will strengthen the entire Bazan Group, will yield synergies to the Company and to CAOL, and will facilitate the operational and financial flexibility of the Bazan Group. ORL has also agreed as part of the arrangement, inter alia, to grant the debenture holders of ORL and CAOL the right of proportional early redemption in the event that CAOL shall decide to make early repayment to its banks. In addition, ORL has agreed to ensure an increase of 0.2% in annual interest to its debenture holders in the event that the amounts delivered to CAOL shall be greater than a fixed amount, and undertake to raise capital in the event that amount paid to CAOL exceeds $135 million. The announcements convening the meetings of debenture holders include other provisions, concerning convening the meetings, as well as the arrangement proposed by the Company, and are available (in Hebrew) through the websites of the Stock Exchange, the Israel Securities Authority and the Company's Investor Relations website. The only binding version of the arrangement proposed is this included in the Hebrew announcements of convening the meetings of debenture holders.