While Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) chairman Lev Leviev is the first tycoon to ask his company's bondholders for a settlement, he will undoubtedly not be the last. The bonds of Benny Steinmetz's Scorpio Real Estate Ltd. (TASE: SCRP.B1) are traded at a yield of almost 90%, because of the real estate crisis in the company's area of business in Eastern Europe.
Benny Steinmetz owns 90% of Scorpio Real Estate through Scorpio Investments (AW) Ltd., while his son-in-law Shimon Menachem owns the other 10% and serves as CEO.
Menachem told "Globes" yesterday, "Just as we know how to ask for money, we'll know how to stand up and explain the precise circumstances of the company."
"Globes": You understand investors' concerns?
Menachem: "Obviously, investors are worried about the company's ability to repay its debt. They read the papers. We've met them, and we described matters very clearly in our reports all along the way. There's an insane stoppage in Eastern Europe, and everyone knows this. I didn’t invent this. The crisis was global, and Eastern Europe was hard hit, along with the US, and elsewhere."
In January 2007, Scorpio Real Estate raised NIS 516 million in a bond offering. The bonds bear a coupon rate of 6.25% annual interest, and mature in five equal installments in 2010-14. The big question is about the first payment of NIS 133 million, due next January.
Will you have to reach a bond settlement, like Africa-Israel?
"No one knows what will happen the day after tomorrow. We're working very hard, and strongly believe that we'll pay, but there's a risk. Everyone operating in Eastern Europe today is at some risk or other."
Will Benny Steinmetz inject capital into Scorpio?
"You expect me to answer that? I'm the CEO. The company's sources are the ones we stated in our cash flow. I must sell assets to make the January payment. Questions about Benny you should direct to him. How can I respond to such a question?"
Published by Globes [online], Israel business news - www.globes-online.com - on September 10, 2009
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