Africa-Israel Investments Ltd. (TASE:AFIL) controlling shareholder Lev Leviev is raising the white flag and is seeking a debt settlement for the second time. As reported by "Globes," the worsening of the situation in Russia has caused a bank there to call in immediate repayment of a loan extended to Africa-Israel's Russian unit AFI Development plc (LSE:AFID). The bank recently sent AFI a letter warning it that it was not meeting its commitments.
The company's bondholders were alarmed by developments and called a meeting of major bondholders to discuss how the NIS 3 billion debt can be repaid. Africa-Israel's representatives said that there were talks with the Russian bank and even though the bank's ultimatum to AFI had expired, senior executives sounded optimistic.
However, Africa-Israel has now announced that it plans beginning talks with all bondholders on renegotiating debt repayments.
Africa-Israel has already successfully negotiated a first debt settlement in the years following the economic crisis in 2008.
The bondholders have now informed the trustee on which series of bonds they agree (and demand) the appointment of an assessor to appraise the value of Africa-Israel's assets ahead of major proceedings to take control of the company and sell its assets. The major bondholders are also demanding that Leviev inject between NIS 500 million and NIS 1 billion as a condition of his remaining with the company.
An analysis of the 28th series of bonds finds that even if the Russian bank were to foreclose on AFI Mall in Moscow, liquidation of Africa-Israel would yield them NIS 0.50 per shekel at a most conservative estimate and certainly no more than NIS 0.70. So in practice, in order to keep damage to a minimum, the bondholders would rather take control of the company, liquidate it, and see some money.
It should be taken into account that without AFI Mall, there is no chance of Africa-Israel fully repaying its debt, even if the Russian economy recovers to what it was before the major crisis of the past year.
In its notification to the Tel Aviv Stock Exchange (TASE), Africa-Israel recounted that the Russia-Ukraine conflict has brought international sanctions and this combined with the fall in oil prices and a sharp devaluation of the ruble has thrown the Russian economy into deep crisis and it is unclear when the crisis will end.
The repercussions of this crisis have hit Africa-Israel's Russian unit AFI Development hard with ongoing erosion in revenue and profit to Russian real estate operations mounting to hundreds of millions of dollars in the value of its real estate investments.
It is also clear from Africa-Israel's statement that the Russian bank intends to foreclose on AFI Mall and the bondholders will have to act swiftly in order to avoid this.
Published by Globes [online], Israel business news - www.globes-online.com - on May 18, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016