Africa-Israel Investments Ltd. (TASE:AFIL)bondholders are beginning to respond to the company’s announcement it will seek early repayment of the loans provided AFI Development to fund its Moscow complex, AFIMALL.
A source from a senior institutional investor holding a large bond package told “Globes” on Wednesday that Africa Israel violated section 18.104.22.168 of the debt refinancing agreement signed a month and a half ago. The clause allows the agreement to be revoked if a significant situation arises which the bondholders were not aware of before signing, and for the bondholders to act against the company over Series Kaf Vav, Kaf Het, and Kaf Zayin bonds.
After the agreement was signed, Africa Israel published a profit warning that was expected and its financial results. Under the terms of the deal, the bondholders agreed to not pursue legal action unless the company’s rating fell, which is why the profit warning and the reports surprised no one; but the Wednesday announcement upended the plan and the bondholders are claiming the agreement was fundamentally breached.
The bondholders are demanding the company choose between two courses of action: sell half of its holdings in AFI Development to inject immediate capital back into the company or fully liquidate its holdings in AFI Development to cut the continuing losses while injecting capital back into Africa Israel.
The bondholders said Lev Leviev could also use his own funds to allow Africa Israel to provide AFI Development the capital to avoid the AFIMALL situation and return to the agreement signed a month and a half ago.
Bondholders claimed they were stringently opposed to Africa Israel drawing dividends from Africa Israel Properties or any other subsidiary to inject funds into AFI Development and that Africa Israel does not have the capital stock to inject to AFI Development leaving the parties at an impasse.
A major institutional investor with large holdings in Africa Israel bonds said: “The situation cannot endure this way; the way we see it, Africa Israel bonds should be paid immediately.”
Under the agreement Africa Israel signed with bondholders in February, the company paid NIS 440 million of principal and interest to bondholders of the 3 aforementioned series. Africa Israel started the year with cash reserves of NIS 560 million and was left with only NIS 120 million after paying the bondholders.
The company committed to not inject cash to any subsidiaries without first informing the trustees, among other measures intended to restore bondholder confidence.
A major player in the bond market told “Globes” on Wednesday the matter was of utmost significance for Africa Israel if it loses AFI Development’s central asset, it loses the ability to recover value for bondholders. The issue is being studied by the bondholders’ legal consultants, as it is possible that other bondholders would take legal action against the company if AFIMALL is taken (which would regardless not happen overnight).
Hermetic Trust CEO Dan Avnon, the trustee of Africa Israel bonds, refused to comment on the matter at this stage.
Published by Globes [online], Israel business news - www.globes-online.com - on March 31, 2016
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