As previously reported by "Globes", against a background of attempts to put together a second debt arrangement in Africa-Israel Investments Ltd. (TASE:AFIL), the company is progressing with possible sales of the main assets of its AFI Development subsidiary, which holds the group's business in Russia. At the end of last week, AFI Development called a shareholders meeting for August 1 for this purpose.
The shareholders will be asked to approve the proposed disposal of properties in Moscow to Russian state-owned bank VTB in exchange for VTB releasing the group from all of its obligations in respect of the loans of approximately $619.1 million. The properties in question are AFIMALL City Shopping Centre, a shopping and entertainment center in the business district of Moscow; Ozerkovskaya III, a completed Class A office complex in Moscow; and Aquamarine Hotel, a modern 4-star hotel, located in the Ozerkovskaya III complex.
The aggregate value of the three properties on AFI Development's books at the end of November 2015 was $877 million, so that the proposed swap with the bank will cut the company's shareholders' equity in its second quarter financial statements by $253 million to about $500 million. Africa-Israel owns 65% of AFI Development, and its shareholders' equity will accordingly shrink by $164 million and it will record a loss of $127 million.
The Russian bank's demand a few months ago for immediate repayment of the loan to AFI Development was the signal for Africa-Israel to seek a NIS 3.2 billion debt arrangement with its bondholders.
The deal with the bank was on the point of being signed when Africa-Israel controlling shareholder Lev Leviev agreed to provide a personal guarantee for the $191 million loan financing the office complex, but this was conditional on the debt arrangement with the bondholders in Israel. AFI Development's announcement of last week stated: "In addition, as at the date of this announcement, the Guarantee continues to be discussed between the Bank and Mr Leviev, the Executive Chairman of the Company. If these discussions result in the Guarantee being agreed prior to Completion then, subject to obtaining all approvals (including any Shareholder approvals) required in relation to the Guarantee, the Board may determine not to proceed with the Disposal. However, the Board notes that there is no certainty as to whether the Guarantee will be agreed, approved (if necessary), or entered into prior to Completion."
In the past few weeks it seemed as though Africa-Israel's second debt arrangement was making progress, but the sides have not yet reached final understandings.
Meanwhile, Africa Israel Properties has announced the signing of a non-binding letter of intent for the sale of assets in Berlin for €125 million. Africa Israel Properties sees a profit on the deal of €6 million (about NIS 26 million), and free cash flow resulting from it of €51 million (about NIS 218 million).
This deal is part of Africa Israel Properties' plan to liquidate its business in Germany and focus on Eastern Europe and Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on July 18, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016