One day before the bids for a second debt arrangement at Africa-Israel Investments Ltd. (TASE:AFIL) come up for discussion at a bond creditors meeting, Moti Ben-Moshe and Lev Leviev, the current controlling shareholders in the investment company, have improved their bid to acquire the insolvent company. They claim that their bid reflects a NIS 2.1 billion repayment to the creditors and a write-off of a quarter of the company's huge debt to its bondholders.
Ben-Moshe and Leviev's new bid joins a bid by the Saidoff brothers (a write-off of at least 27%), and a proposal presented yesterday by the major Africa-Israel bondholders, headed by Psagot Investment House Ltd., Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), and the DK Partners fund, which they say represents a potential debt repayment of NIS 2.3 billion (a write-off of "only" 20%).
Africa-Israel owes NIS 2.89 billion to its bondholders, NIS 2.56 billion of which is to holders of Series 26 and 27 bonds, while the rest is to holders of Series 28 bonds. Almost all of the controlling shares in Africa-Israel Properties Ltd. (TASE: AFPR) (56%), the group's main subsidiary, which has a NIS 1.25 billion market cap, are attached in favor of the holders of Series 26 and Series 27 bonds, so petitioning the court to foreclose the lien should lead to repayment of 45% (if not more) of the debt for these two series within a short time.
Ben-Moshe and Leviev are now offering to buy all the shares in Africa-Israel in exchange for a NIS 700 million injection - half of the sum to be paid immediately upon implementation of the arrangement, and the rest in two payments spread of two years from the implementation date. This money will be used to repay the new bond series to be issued in place of the existing ones, which will amount to NIS 2.1 billion, with a four-year duration at real interest of 4.5%, while only one of the series will be secured with a lien on 51% of the shares in Africa-Israel Properties.
Furthermore, the bids also includes a NIS 450 million cash payment on the date on which the deal is completed, while the bondholders will at the same time be given all of the company's holdings in Derech Eretz Highways, which operates the Cross Israel Highway (Highway 6) according to a NIS 150 million value. The bondholders will also receive land in Russia that is already attached in their favor at a value that will be worth at least NIS 25 million years from now. There are also other measures, such as promoting a future offering by the Danya Cebus subsidiary or bringing an external partner into it. If neither of these takes place, the bondholders will receive NIS 40 million more 30 months after the debt arrangement date.
At the same time, Ben-Moshe and Leviev's bid includes consent to refrain from withdrawing dividends during this period, plus immunity from claims against the company and its executives, including Lev Leviev, and setting a three-week period of exclusivity in negotiations with the bidders over terms for the final settlement. These last two issues are a problem for the bondholders, because they want to retain the threat of legal proceedings against Leviev and his executives, and because they are afraid that the other options will not remain relevant.
A source among the bondholders added today, "The bid by Ben-Moshe and Leviev is questionable for several reasons. Its value is lower than the proposal by Psagot, DK, and Clal Insurance, and the relative proportion of holdings by Leviev and Ben-Moshe in the concern making the bid is unclear, while the entire matter of advance immunity for Leviev and the executives is unacceptable." The source added, "There is no guarantee or deposit that in the event that the negotiations fail, there will be something to foreclose several weeks from now."
Published by Globes [online], Israel Business News - www.globes-online.com - on June 6, 2017
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