Another subsidiary of Shaya Boymelgreen's Boymelgreen Capital Ltd. (TASE:BMGN) is in financial trouble and at risk of defaulting on a bond payment. Engel Europe Ltd. (TASE: ENGR1 ,ENGR5) today notified the Tel Aviv Stock Exchange (TASE) that it will not be able to repay its bonds because subsidiary Engel Resources and Development Ltd. (TASE:ENRS) cannot repay an owners loan of NIS 51 million.
Engel Europe has a NIS 44.9 million interest and principle payment on its bonds due on October 1.
The ownership structure is as follows: Shaya Boymelgreen owns 89.8% of Boymelgreen Capital, which owns 63.8% of Azorim Investment, Development and Construction Ltd. (TASE: AZRM), which owns 64.9% of Lagna Holdings Ltd. (TASE;LGNA), which owns 75.8% of Engel Europe, which owns 76.8% of Engel Resources. Shaya Boymelgreen therefore indirectly owns 21.6% of Engel Resources.
Mizrahi Tefahot Bank (TASE:MZTF) has a lien on most of the shares.
Engel Europe said that it would examine ways to obtain the balance of the loan owed it by Engel Resources, and to sell its rights. Engel Resources cannot repay the loan because the banks have tightened their covenants, and it may have trouble obtaining the proceeds from the sale of properties and face foreclosure on properties still in its possession. Engel Resources is due to repay the owner loan to Engel Europe the day before Engel Europe has to make its bond payment, and Engel Resources will not be able to make its own NIS 7 million interest payment on its bond at the end of August if it pays off the owners loan.
Engel Europe's share fell 7.9% to NIS 20 following the report, and the yield on its bonds rose to 69.2%. The other shares were not as affected: Boymelgreen Capital was unchanged at NIS 19, Azorim fell 0.1% to NIS 20.04, Lagna fell 0.8% to NIS 5, and Engel Resources was unchanged at NIS 27.
Published by Globes [online], Israel business news - www.globes-online.com - on August 19, 2009
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