CRS led this deal by reinsuring $480 Million, with AA Reinsurers.
Discount Bank approved a huge $ 600 million guarantee to Israel Aircraft Industries (IAI) and Israel’s largest defense industry. The total scope of the agreement is $ 2 billion.
On April 6, under the direction of Yossi Weiss, IAI signed an agreement to sell Barak 8 defense missiles to the state of India for the Development of Defense Measures also known as DRDO.
The Barak 8 being the largest and most advanced ground based missiles defense system in the region will be used by India’s ground forces for a total of $1.6 billion in order to provide larger quantities of missiles, launchers, communications systems, command and control systems, which include a more advanced radar system.
The Bank’s guarantees will be the main part of the agreement – the sale of Barak’s missile systems for $ 1.6 billion. Discount Bank was the only bank that managed to place the guarantee within two weeks, reinsured 80% of the guarantee and thereby reduced its exposure to $120 million.
Calcalist has been informed that the bank’s exposure to international AA reinsurers has been made possible through CRS Capital Relief Solutions owned by Esti Friedman and Itzik Klein who approached the reinsures to (Re)insure 80% of the guarantees.
The extent of the guarantees to a single customer, mainly from a medium-sized bank such as Discount, is exceptional. The deal was offered to other banks; however, Discount was the first bank to announce that it could issue the guarantees within the required timeline of two weeks.
The transaction required IAI to obtain advance payment guarantees & performance guarantees to the customer. The advance payment guarantees are for the payments made by the Indians for the systems, and the performance guarantees are guarantees that IAI will meet the supply and timetables set.
Bank Discount managed by Lilach Asher Topilsky issued guarantees which included both types. The performance guarantees are for a period of 8.5 years, since IAI undertook to supply of the systems within a four-year timeline in addition to maintaining them for several more years.
The Barak 8 system was developed with the aim of providing protection to vessels against current threats and its ability to respond to both air and ground danger. The system is a joint venture of IAI and DRDO, Rafael Military Systems, IAI’s subsidiary – Elta Systems, and the Indian companies BEL, BDL and L & T.
On Aug 3, 2017 the Indians made a first payment of $ 250 million, and Discount has already provided an advance payment guarantee.
IAI has already sold Barak Systems 8, which included command and control systems, to several customers worldwide, totaling $ 3 billion.
Since this is an off-balance-sheet transaction, the profit to Discount Bank will derive from commissions on the transaction in and additional operating costs.
The deal was led by Discount Business Division, headed by Orit Elster, manager of large companies, Uri Twig, Head of the defense industries Tomer Grinshpan, and Head of the syndication unit Orian Dagan.