Africa Israel Investments Ltd. (TASE:AFIL) CEO Avraham Novogrocki made a presentation of the company's business to bondholders on Thursday. Novogrocki surveyed each company in the group and explained its activity. On AFI Development, Novogrocki said, among other things, "This is a predominant company in the group and it is important to us. Its business is conducted in Moscow. There is a large and very successful mall in Moscow, and other very good assets in very good locations. This is the company's leading asset and it will serve us for many years. But it is not possible to ignore the situation in Russia and what has happened there in the past year.
"Discounting the debt, the company is worth $1.3-1.4 billion. The assets are worth $2 billion on the books. Anyone who visits the mall will find himself in Manhattan. True, this Manhattan is not in a good state at present, but we believe that that is temporary. Within two, three, four or five years, things will change, and will change for the better."
Africa Israel Industries: "The company was in the headlines quite a bit because of dishonesty on two levels: illegal drawings of a few million dollars, and alterations to the financial statements, which are unworthy of us. There are thieves and dishonest people around. It shouldn't happen. Nadav and I are deeply involved in the subsidiaries in order to bring them from darkness into the light fairly quickly."
Africa Israel Properties: "This is a large company with high value. Only recently it distributed a NIS 200 million dividend. The company develops properties in Israel and in Eastern Europe. All the company's projects, and it has dozens, are winning projects in good locations, and we are succeeding even in countries where the business environment is not so good."
Novogrocki added, "So why have we convened here? Since the settlement in 2010, we have serviced a debt of NIS 4 billion. Leviev gave NIS 800 million before the settlement and NIS 750 million after it. The company itself sold assets, and the proceeds serviced the debts. Today we have bonds at fairly high interest rates that weigh on the company, and we have assets and dividends that the group companies distribute, and we are pressing them for more activity and greater profitability in order that they should be able to distribute more dividends.
"The quantity of dividends will not be sufficient, and in order to service the debt we will have to sell assets. We are open to any offer on a portion of our assets; the company is operating today in order to service the debt to the bondholders. It is doing this religiously, and drawing dividends from the subsidiary companies. We will take steps to sell those companies and assets that have risen in value. If the bondholders give us greater quiet, it will be possible to sell at better prices.
"My message is that we don’t have to touch anything in Russia in the next few years. There is enough time and there are enough assets to allow this business to recover. We have a plan for the order in which assets should be sold and from where to take dividends and when, until Russia recovers, and we believe that in the coming years Russia will resume an upward path. It's inconceivable that Russia won't change. In another four-five years, Russia will be in a different place from where it is today. Until then, we can also service the debt with the help of assets we have in Eastern Europe and in Israel. The interest rates on the bonds are not low, but we are servicing them faithfully and taking care to have enough cash for a year ahead. We also believe that as soon as the situation in Russia improves, the rating of our debt will go up again.
"The debt is constantly uppermost in our minds and we are working on how to solve it. This is the main part of my job, and if we see that there's a problem we'll be the first to raise a flag. The message is that we have cash and there are assets for sale," Novogrocki concluded.
Published by Globes [online], Israel business news - www.globes-online.com - on December 27, 2015
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