Africa-Israel debt restructure deal at risk of collapse

Africa-Israel CEO Izzy Cohen stormed out of a meeting early this afternoon with bondholders' representative Adv. Lipa Meir.

Africa-Israel Investments Ltd.'s (TASE:AFIL; Pink Sheets:AFIVY) debt settlement, reached on October 30 with the company's bondholders, may be at risk of collapse. The bondholders' representative body will hold an urgent meeting this afternoon, and may decide to oppose the settlement after Africa-Israel chairman Lev Leviev reached deals with the banks over the debt of his personal company, Memorand Management (1998) Ltd., through which he controls Africa-Israel.

A senior source at one of the investment institutions told "Globes" that the banks dictated terms to Leviev to change the structure of the debt settlement reached with the bondholders, and they oppose these changes. The bone of contention is four clauses in the deals with the banks, which contradict the bondholder settlement.

Africa-Israel CEO Izzy Cohen stormed out of a meeting early this afternoon with the bondholders' representative Adv. Lipa Meir, and it is not known if the talks will resume today. The meeting was apparently aimed at preparing the groundwork for a meeting with Africa-Israel's bondholders.

Leviev's right-hand man, Africa-Israel vice chairman Nadav Grinshpon, attended the meeting with Meir. Representatives of the bondholders later joined them, including the representative from Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL).

A senior executive of one of the banks that reached the deal with Memorand, dismissed the bondholders' claims, saying, "The agreement we reached with Leviev has been signed, and we have no intention of reopening it. The agreement is fair, and takes into account the agreement with the financial institutions who were always seated across the table from us. The agreement was worded to avoid any contradiction."

Under the deals with the banks, Leviev will transfer NIS 450-500 million to Memorand's largest creditor, Bank Hapoalim (TASE: POLI), and transfer an additional NIS 250 million to the other creditor banks. He also undertook to strengthen the collateral for these debts in exchange for rescheduling them.

Leviev sent the bank deals to the bondholders for their consent, but it is not forthcoming. One reason is that the bank deals stipulate that Memorand can exercise its controlling interest so that the debt settlement is not completed by convening shareholders and bondholders meetings to approve the settlement.

The bank deals also stipulate, "Restrictions on the sale of Africa-Israel shares held by Memorand will not apply with regard to the exercise of the lien on these shares in forced sales following the sale of shares held by the banks."

The source told "Globes", "All the restrictions imposed on Leviev are not acceptable. There will be no debt settlement with these clauses, which Leviev closed with the banks without consulting us. This is unacceptable. These clauses empty the settlement of all worth."

Leviev will now have to come up with some creative solutions to satisfy the contradictory demands - which have been known for a long time - of the banks and the bondholders.

Africa-Israel's share fell 2.5% in morning trading to NIS 47.

Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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