An Offer to Roll Over

"My" Bank has changed my "Yoetz" (Councellor) and he is Yosy, a typical stressed Ashkenazi with an eye tic and unvoluntary lips play. It is painful to talk to him. The man is a real adviser and has re-organized my portfolio, first with a "מכירה רעיונית" which is the selling and buying of stock for tax purposes. Then he offered me a 1.5% rate loan (with all the expenses it comes to 5%) in order to roll-over older loans with higher rates. We also bought new merchandise: he pushed Melanox - a rental real estate business, that has 98% occupancy and is replete with cash. I balanced out his advise with Teva, which seems to me a healthy business and paying nice dividends. He said that after a 15% rise last two weeks, NO ONE is buying Teva. Well, I'm the "no one". I told him the tremendous backlog of orders I am having, and how Dor Alon is building two - three gas stations per month and so on, and the owner is his relative, a fact that made him self-pity: "And I am a bank employee...!" His office is in a windowless basement, I rather like the place.

He did not dismiss the social protest of last summer but said to avoid supermarkets and food companies like Strauss and Osem because they are facing the popular protest, and to avoid banks because the government is forcing down housing prices, that will hit strongly mortgage banks.

I'm reading in the financial press that many concerns have cash flow problems and are taking loans at 12% with options of exchange for stock at attractive prices. If I can get credit at 5% - why not invest in something like that? Am I a crazy risk-addict or what?

Addenda: GADOT Biochemicals Ltd.

The company makes food grade citric acid from sugar, and was hit by high sugar prices and in 2011 lost 18 million $ and 35 million $ in 2010. It has no capital at all. In September it was purchased by DELEK paying 129% premium on bourse price. DELEK is a strong concern and will honor the bond. GADOT owes some 39 million dollars in short term debt. The bond sells at 88 shekel and its schedule is:

07/05/2012 2.55%
07/11/2012 33.33% 2.55%
07/05/2013 2.55%
07/11/2013 33.33% 2.55%
07/05/2014 2.55%
07/11/2014 33.33% 2.55%

The question: if I take 3 year 5% loan and buy this bond, am I making a profit? The NPV of the bond after discounting the interest paid by me on the loan is about 10 shekel for every 100 shekel invested. The catch is that I pay tax on interst paid to me (20 - 30% G-d knows). I could balance that out with the interest I am paying, but that requires an accountant and dealing with tax authorities. At my scale of operations it is not worth the trouble.