Brothers Naty and Ofer Saidoff today notified the trustee for bonds issued by Africa-Israel Investments Ltd. (TASE:AFIL) that in pursuance of the request by the bondholders' representatives, they had decided to submit an immediate and binding bid to acquire all of Africa-Israel's shares in the framework of an overall debt settlement with the bondholders.
According to the Saidoffs, their bid, which is not conditional on due diligence, will be valid until next Wednesday. They will be invited to present their final bid for approval by a meeting of the bondholders. In a letter sent by the Saidoffs, through Israel Leshem and Yoav Nahir from the Meitar Liquornik Geva Leshem Tal law firm, they said they wanted to conduct rapid and businesslike negotiations with the bondholders' representatives in order to close the particulars of a final deal.
Africa-Israel owes NIS 2.89 billion to its bondholders for bond series 26 and 27. According to the Saidoffs' bid, in exchange for all the shares in Africa-Israel, the bondholders will receive NIS 400 million in cash, NIS 400 million in short-term bonds payable within a year of the date of the arrangement, and NIS 1.15 billion in long-term bonds from two series.
One of these series will be unsecured, while the other will be secured with a lien on a 56% controlling interest in Africa-Israel Properties Ltd. (TASE: AFPR), which has a current market value of NIS 1.24 billion. The two bond series will be issued at 3% annual interest with a 6.5-year duration. 70% of the principal in the bonds will be payable when the bonds mature.
The Saidoff brothers are also offering additional proceeds to the bondholders in the form of 2% of the shares in Africa-Israel Residences Ltd. (TASE:AFRE), which has a current market value of NIS 20 million. This company owns a plot in Russia that cannot be sold. The Saidoffs are also offering possibilities of benefiting from a future rise in the value of Africa-Israel's subsidiaries. For example, the bondholders will receive 5% of the shares in infrastructure company Danya Cebus Ltd. (TASE: DNYA) if it holds a stock exchange offering within two years of the arrangement date at a value of less than NIS 500 million.
The bondholders will also receive a special NIS 70 million payment if the market cap of Africa-Israel Properties reflects a 1.2 multiple on its equity. The company is currently traded at a NIS 2.2 billion market cap, reflecting an equity multiple of only 0.89.
The Saidoff brothers believe that their bid relies on more than NIS 2 billion in liquid assets, and that its value is more than NIS 2.1 billion. They also reported that in order to prove their ability and seriousness, they had given the bond trustee, Hermetic Trust Services, proof from a leading financial institution of their ability to make the payment immediately.
A takeover is likely to yield greater proceeds
The Saidoff brothers' current bid comes after Africa-Israel reported early this week that it had been notified by the trustees that the bondholders' representatives had reached agreement with Moti Ben-Moshe and Lev Leviev on principles for formulating a second debt arrangement for the company. Particulars of the arrangement were not published officially and in full, but they include a NIS 300 million cash payment to the bondholders on the date on which the arrangement is finalized, and NIS 400 million more in further payments, together with a NIS 1.3-1.5 billion bond issue and the possibility of additional proceeds in the event of a future rise in the value of some of the assets.
The bids, one by Ben-Moshe and Leviev and the other by the Saidoffs, are ostensibly similar, and involve writing off 27-31% of the bond debt. At the same time, the bondholders have a third possibility - they can take positive action to take over Africa-Israel through the court and sell its assets piecemeal. According to several bondholders, much more can be obtained in this way - NIS 2.3-2.5 billion - within a year.
Such an action will begin with the sale of the 56% controlling interest in Africa-Israel Properties, which should yield at least NIS 1.2 billion, following by the sale of the 74% controlling interest in Africa-Israel Residences, which should yield a net of NIS 400-500 million (after repaying the debt to Israel Discount Bank (TASE: DSCT)).
Published by Globes [online], Israel Business News - www.globes-online.com - on June 1, 2017
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