EZ Energy Ltd. (TASE:EZ), controlled by Eli Zahavi, today announced the sale of its US gas stations and convenience stores operations for $64 million to a foreign gas stations operator. The proceeds should cover all the company's debt to Israeli bondholders and the loans of subsidiary EZ Energy USA Inc. The company said that it will offer to redeem all its bonds in full when the sale is closed on September 15.
The company's US operations included the management of 91 gas stations and convenience stores in Pennsylvania and Ohio. EZ Energy USA owes $17 million to a US bank and Israel's Mustang Mezzanine Fund, and $26 million (NIS 107 million) to its bondholders. After repaying these debts, the company expects to report a capital gain of $10 million on the sale.
EZ Energy's bondholders were already readying for a debt settlement offer that would include a rescheduling of payments. The unexpected good news sent the prices of the bonds up 55%. In February, the company defaulted on the third of the five premium payments of NIS 42.1 million.
Zahavi, who has a background in the US fuel industry, founded EZ Energy in 2006, and held the debt issue in early 2007. The company began buying blocks of gas stations and convenience stores. It later sold the land to REITs in buy-and-leaseback deals, while continuing to operate the properties.
The economic crisis and rise in fuel prices slashed the marketing margins of US gas stations and reduced sales at convenience stores, and the REITs offered less for the properties' land (which would give them higher returns). As a consequence, EZ Energy was unable to buy more gas stations that would give it the critical mass to be profitable, and it posted a loss of $5 million in 2011 and $2.4 million in the first quarter of 2012.
Over the past few months, the company requested several postponements on the repayment of the bonds principle, and an attempt to sell the land of 16 gas stations to a REIT failed, partly because of the REIT's concerns over EZ Energy's financial condition and its ability to pay the rent on the properties.
EZ Energy recently turned down an offer by Arko Holdings Ltd. (TASE: ARKO), controlled by Arie Kotler, to buy half of the company's US operations, and to use the proceeds to repay the bondholders, who would have had to take a loss.
EZ Energy's share price rose 20.8% today to NIS 0.029, giving a market cap of NIS 27 million.
Published by Globes [online], Israel business news - www.globes-online.com - on July 19, 2012
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