The rift between the banks and financial institutions over the Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) debt settlement seems to be widening as both side flex their muscles. The financial institutions that hold Africa-Israel bonds this morning rejected the improved offer made the banks last night.
The bondholders were due to meet at the office of the bondholders' representative, Adv. Meir Lipa, but instead said that the banks' offer is not acceptable and that there was no point in holding the meeting scheduled for today. A source at one of the financial institutions told "Globes", "There's no point in meeting on this proposal, which is not acceptable to any of the bondholders."
After Africa-Israel chairman Lev Leviev reached settlements with the banks over the debt of his private company Memorand Management (1998) Ltd., the financial institutions objected to some of the clauses in the deals on the grounds that they rendered the debt settlement with Africa-Israel meaningless. In the bank deals, Leviev promised to transfer NIS 450-500 million to Bank Hapoalim (TASE: POLI) and an additional NIS 250-300 million to four other banks.
The problematic clauses, as far as the financial institutions were concerned, were the restrictions that the banks sought to impose on the sale of Africa-Israel shares held by Memorand. The financial institutions also opposed clauses abrogating remedies agreed to in the event of dividend offsets. The banks also had the right to step in to Memorand's memorandum of understanding (MOU) with Africa-Israel's bondholders. These clauses meant that if Memorand defaulted, Africa-Israel would be released from the agreements with the bondholders. The financial institutions opposed these terms.
The financial institutions threatened to torpedo the debt settlement reached with Africa-Israel in late October. The bondholders' representative body made it clear that it would not change the structure of the debt settlement. The banks gave in first and submitted an alternative proposal in the direct talks between them and the financial institutions.
In the new proposal, the banks agreed to apply the restrictions on the sale of Africa-Israel shares by Memorand only after Leviev meets his commitment to transfer NIS 200 million two years after the agreement comes into effect. In the debt settlement, Leviev promised to transfer NIS 300 million to the financial institutions immediately, and transfer an additional NIS 450 million in annual payments. The NIS 200 million is in addition to those sums.
Africa-Israel's share rose 1.6% in morning trading to NIS 45.
Published by Globes [online], Israel business news - www.globes-online.com - on November 23, 2009
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