Over NIS 1b bid for Africa-Israel

Larry Mizel Photo: Reuters

The offer by US businessmen Larry Mizel and Michael Steinberg is the third recently made to the bondholders in Africa-Israel, which owes them over NIS 2 billion.

US businessman Larry Mizel today filed a new binding bid through the Coleridge group, which he controls, to acquire the Africa Israel group in the framework of Africa Israel's debt settlement. The bid was submitted jointly with US real estate firm Steinberg Group, owned by Michael Steinberg; the bidders believe that it reflects over NIS 1 billion in proceeds for Africa Israel's bondholders.

The bid is the third submitted recently to the trustees for Africa Israel's bonds in the debt settlement. Africa Israel paid NIS 1.25 billion to its bondholders following the sale of the controlling shares in Africa Israel Properties. The first two were by Lapidoth Capital, controlled by Jacob Luxenburg, and by Shikun & Binui and Mivtach Shamir. The two bids guaranteed the bondholders NIS 820-830 million in net proceeds, compared with a current debt of NIS 2 billion.

In the new bid, Mizel is offering to inject NIS 300 million in cash into Africa Israel in exchange for an allocation of 65% of the company's shares. This sum will be given to the bondholders, plus an allocation of the other 35% of Africa Israel's shares. The shares currently held by former controlling shareholder Lev Leviev and the public will be canceled and eliminated.

The bondholders will thus become strategic partners in the new real estate platform that Mizel is seeking to found in Israel on the basis of Africa Israel. Mizel is currently active in Israel in building the Museum of Tolerance at a cost of $260 million.

The bid also shows that the only assets that Africa Israel has left are its holding in infrastructure and construction company Danya Cebus (including the controlling shares in Africa Israel Properties) and Africa Israel's rights in land in Savyon (including its holdings in Mishtalot Savyon). Africa Israel also has accumulated losses for tax purposes.

The rest of Africa Israel's assets, headed by the net cash remaining in its treasury at the time of the acquisition, after deducting debts and liabilities (including tax liabilities and priority debts, costs of the settlement, and so forth), will also go the bondholders. In response to the bid, the bond trustees, Adv. Guy Gissin and Adv. Ophir Naor, said, "In pursuance of the court rulings and the opening of an information room, we are holding talks and meetings with several parties, including the current bidder. We are now studying the bid, and will take it into account."

Structural separation between Dany Cebus and Africa Israel Residences

In his bid, Mizel states that Africa Israel's holdings (35.5% indirectly) in shares of Canada Israel Highways Management and the companies held by it will remain in its hands after the deal is completed. At the same time, the bondholders will be entitled to any proceeds obtained from the holdings in these companies or from their sale (minus the sale expenses). The bond trustee will be authorized to initiate a sales process, and the company will cooperate with it as necessary.

Mizel also made it clear in his bid that structural separation between Danya Cebus and its subsidiary, Africa Israel Residences, would be created, after which Africa Israel would hold all of Danya Cebus's 74.2% stake in Africa Israel Residences. All of these shares are currently attached in favor of Israel Discount Bank to secure a loan with an outstanding balance of NIS 216 million.

According to the bidder, subject to the bank's consent to release the lien on 20% of the shares in Africa Israel Residences, these shares will also be given to the bondholders. As part of this measure, Mizel is also undertaking to inject a loan of up to NIS 100 million in the framework of the structural separation.

Africa Israel Residences is currently traded at an NIS 880 million market cap, reflecting a market value of NIS 176 million for the shares that Discount Bank is being asked to release from its lien. The bondholders will also receive the NIS 300 million injected by Mizel, the estimated net cash of NIS 170 million, the estimated NIS 150 million proceeds from the sale of shares in the operating company, and a 35% stake in Africa Israel.

According to the bid, Africa Israel will also undertake to distribute a dividend of 40% of the distributable profits in the first five years following the settlement, subject to the company's financial situation. The bid is contingent on due diligence, obtaining consent from all parties to the structural separation, approval by Africa Israel's bondholders, and court approval.

Published by Globes, Israel business news - en.globes.co.il - on April 3, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Larry Mizel Photo: Reuters
Larry Mizel Photo: Reuters
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