The company's shares will probably lose their value if its proposed debt arrangement goes ahead.
On the verge of a debt arrangement or liquidation that will decimate the share price of Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT), controlled by Mordechay (Motti) Zisser, the price has in fact shot up by more than 70% in February, on unusual volumes of NIS 19.4 million daily. Today too, the company's shares rose by 11.4% on turnover of NIS 9 million, which is exceptional for shares on the small-cap Yeter list, and it now has a market cap of NIS 250 million. Traders are finding it hard to explain the sharp rises in recent days, and it is believed that a foreign buyer is behind them.
Elbit Imaging has liabilities of NIS 2.2 billion on its bonds, which are traded at junk yields of up to 300%. This Thursday, the short-term bondholders will meet to discuss taking steps to protect their rights. On Wednesday, they are supposed to receive their periodic interest payment without the promised principal repayment, a unilateral step being taken by the company, without the bondholders' consent.
Last Thursday, the representatives of the bondholders met company representatives and discussed the outline debt arrangement formulated between Zisser and the overseas funds York Capital and DK Partners, which, as far as is known, have bought up about half the bond debt. This morning, the company said in a notice that, under the proposed outline, the entire bond debt will be converted to equity. Whoever declines that arrangement will receive a payment which was unspecified, but which is likely to be very low. The company's bank debt will not be affected; it owes Bank Hapoalim NIS 240 million and Bank Leumi NIS 60 million.
Motti Zisser will continue to hold a minority stake in the company, and will receive an option to raise his holding if the company's value recovers. "Globes" checked and found last week that, over the years, together with other Elbit Imaging managers, Zisser has enjoyed generous employment terms. His annual salary alone, without bonuses, is NIS 4 million. Zisser has no intention of injecting cash into the company under the proposed debt arrangement, and no ability to do so.
Elbit Imaging deals in real estate development, mainly in Eastern Europe and India. It is also active in biomed, through subsidiary Elbit Medical Technologies. According to its sources and uses of funds statement published last month, the company is due to pay NIS 732 million this year, but has only NIS 116 million cash.
Meanwhile, Zisser's own largest creditor, Bank Hapoalim, continues to take steps to enforce the lien it holds on his shares in Elbit Imaging (53% of the company). Lawyers acting on the bank's behalf are threatening to apply for Zisser's assets to be put into receivership this week. Zisser, through private company Europe Israel, owes the bank NIS 850 million, while the shares given as collateral for the debt are worth only NIS 120 million, even after the recent rise in their market price. As far as the bank's management is concerned, the grace period for Zisser is over, and it will be hard to stop the receivership train now that it has left the station.
Published by Globes [online], Israel business news - www.globes-online.com - on February 18, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
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