In the wake of the 25.5% plunge in the share of Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) yesterday following the publication of it financial report, which stated that the company would have difficulty in meeting its commitments, it can be said that investors voted with their feet. Africa-Israel helped dragged down the Tel Aviv 25 Index by 2.3% and the Real Estate 15 Index by 5.5%. The company's bonds plummeted by up to 34%.
Halman-Aldubi Provident Funds CEO Dan Halman says, "The market response to the company's announcement was exaggerated and incorrect."
Halman noted, "Africa-Israel's effect on the domestic market is fairly low. A scenario of a collapse of IDB or Delek Group would be much more significant to the Israeli market because the domestic activity of these corporations and their number of employees is much greater."
Halman also pointed to the mistaken attitude toward Africa-Israel's bonds. The company suffers from a serious cash flow problem, but it has many high-quality assets that it can use to service most of its debt. "The company's statement that it will seek a debt settlement in a way that will ensure the full repayment of the debt within a reasonable time will best serve the bondholders, if they're wise enough to take it. Long-term bondholders will probably benefit greatly from a settlement," he said.
Africa-Israel's share fell a further 4.6% by midday today to NIS 49.12.
Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2009
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