Scorpio Real Estate Ltd. (TASE: SCRP.B1) controlling shareholder Beny Steinmetz has invested NIS 67 million in buying back the company's bonds, at a nominal value of NIS 100 million, and a 45% discount on their adjusted price.
Scorpio signed a debt settlement with its bondholders in early 2011. The buyback is good news for the bondholders, both as a vote of confidence in the company, and because a new law stipulates that the debt of a controlling shareholder in a company is subordinate to the bondholders' debt.
Scorpio's nominal bond debt is NIS 300 million, and its adjusted bond debt is NIS 364 million, which means that Steinmetz bought a third of the company's bond debt. The bonds were bought in off-floor trades yesterday at NIS 0.665 per bond. The price of Scorpio's bond rose 3.1% today to NIS 0.722, reflecting a yield of 20% - junk bond status.
Scorpio is a private company. The company raised NIS 516 million in a bond placement among investment institutions in 2007, and listed the bond for trading on the TASE in 2009, just before the company's conditions began to deteriorate.
Scorpio develops and builds residential and income-producing projects in Eastern and Central Europe. The real estate in the region caused the company huge losses and cash flow problems, which at their peak rendered it unable to meet its debt payments and resulted in its auditor attaching a going concern warning to the company's financial reports.
As part of the 2011 debt settlement, Steinmetz injected $100 million into Scorpio in exchange for a rescheduling of the bond's principle from 2010-14 to 2018 and a reduction in the interest from 6.25% a year to 4%. The bondholders received $75 million in cash from Steinmetz, almost half the debt, $5 million was used to repay Bank Hapoalim (TASE: POLI), and $20 million was left in the company to finance its projects.
Scorpio posted a net profit of NIS 255,000 for the first quarter of 2012, after losing almost NIS 1 billion in 2008-11. Its project cash flow is NIS 11 million for 2012 and NIS 112 million for 2013, and NIS 112 million through March 2014. The company's shareholders' equity is NIS 59 million and its consolidated debt is NIS 1.1 billion, most of which is non-recourse loans for its project companies.
Published by Globes [online], Israel business news - www.globes-online.com - on July 9, 2012
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