Following a 24-hour delay, a meeting of Africa Israel's bondholders is scheduled for today that may decide who will acquire the company in its second debt arrangement. It has been three and a half years since the company began negotiations with its bondholders as a result of its inability to meet its obligations.
The bidders for Africa Israel continued to improve their bids in the past two days ahead of the decisive meeting. The bid selected may not be the highest; other factors, such as the quality of the proceeds and the security backing them up, may be considered.
In its current limited form, Africa Israel has two main assets: full ownership of construction and infrastructure company Danya Cebus and a 74% controlling interest in residential construction developer Africa Israel Residences. In addition to these two assets, Africa Israel also owns land in Savyon and has NIS 546 millioncash, including payments it stands to receive from the sale of its holdings in the operator of Road 6.
Zeevi improves offer
There are four bidders for Africa Israel: the Mivtach Shamir holding company, YH Dimri Construction & Development, businessperson Gad Zeevi, and holding company Lapidoth Capital, which made a joint bid with Altshuler Shaham Provident Funds and Pension.
The four bids to be voted on are based on the acquisition of full ownership of Africa Israel through an overall debt arrangement under court auspices. This means that the shares currently held by Lev Leviev and the public will be nullified.
Africa-Israel owes NIS 2.2 billion to holders of its Series 26, Series 27, and Series 28 bonds, who are likely to have nearly half of the debt written off. In return for acquiring full ownership, the four bidders are offering the bondholders packages including cash payments, the cash in the company treasury, and an issue of various securities.
Most of the bidders continued improving their bids in the past two days. Zeevi improved his bid again today in an effort to win the bondholders' support. As of web posting, Zeevi's bid was valuated at NIS 1.286 billion by accountant Isaac Idan from the Baker Tilly accounting firm, the bondholders' economic consultant.
Zeevi increased the cash payment in his bid by NIS 25 million, but his total cash offer of NIS 826 million (including the company's cash) still trails behind two other bidders in this respect. Zeevi is also offering high-quality securities - shares in Africa Israel Residences worth NIS 142 million. However, his bid also includes NIS 300 million in Africa Israel bonds, which have not been regarded as particularly safe in recent years.
Lapidoth Capital's bid is perceived as safer
The improvement in Zeevi's bid puts the joint bid of Lapidoth Capital and Altshuler Shaham in second place in total proceeds, but the latter bid is regarded as safer and simpler. According to Idan, this bid contains a NIS 879 million cash payment (including Africa Israel's cash) on the data of the settlement, and additional payments totaling NIS 365 million in marketable securities.
These securities are of two types, both of them good quality: shares in Africa Israel Residences worth NIS 203 million and bonds of Lapidoth Capital itself worth NIS 163 million. Lapidoth Capital, controlled by Jacob Luxenburg, is a holding company with NIS 390 million shareholders' equity and a NIS 600 million market cap. The company has no debt, and its balance sheet stated NIS 56 million cash as of the end of June.
The proceeds offered by Lapidoth Capital and Altshuler Shaham total NIS 1.244 billion. Lapidoth Capital's ability to continue raising its bid in recent days was largely due to the partnership agreement it signed early this week with Altshuler Shaham, which recently held an IPO, and is has a NIS 1.64 billion market cap.
Under the agreement, Lapidoth Capital will pay 80% of the proceeds package and will be entitled to 80% of the shares in Africa Israel. Altshuler Shaham will pay 20% of the proceeds and receive 20% of the shares in Africa Israel, but its share of the cash payment will be greater, because Lapidoth Capital will pay part of its share of the proceeds by issuing bonds to the Africa Israel bondholders.
No improvement in Mivtach Shamir's bid
Idan valuated the bid by YH Dimri at NIS 1.22 billion, putting it in third place among the four bids. At the bottom of the list was Mivtach Shamir, controlled by Meir Shamir, with a value of NIS 1.169 billion, after the company failed to improve its bid.
The bid by YH Dimri, controlled by Yigal Dimri, contains the second largest cash payment on the date of the settlement - NIS 872 million, including Africa Israel's cash. YH Dimri is also offering high-quality marketable securities: Africa Israel Residences shares worth NIS 147 million and YH Dimri bonds worth NIS 200 million. Some of the Africa Israel bondholders are therefore likely to prefer YH Dimri's bid to that of Zeevi.
At today's meeting of Africa Israel bondholders, they will be asked to vote on another proposal by the trustees according to which their votes will be counted as a single bloc, rather than separately for each bond series, in order to facilitate the selection of the winning bid. If none of the bids receives a majority of the votes, a third round is expected between the two bids getting the most votes.
Published by Globes, Israel business news - en.globes.co.il - on September 5, 2019
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