The management of Jerusalem Economy Ltd. (TASE:ECJM) (JEC), controlled by Eliezer Fishman, believes the comany is able to service its debts, and is trying to restore its investors' trust, after the Russian economic crisis put its securities and those of its subsidiaries into freefall.
JEC, managed by CEO David Zvida, today published a presentation for investors detailing the company's plan for repaying its debts through the end of September 2016. The share of JEC subsidiary Mirland Development Corporation plc (AIM:MLD; TASE: MRLD.B1), which operates in Russia, has plunged, and the yields on its bonds have shot up, giving rise to concerns about its parent company's ability to repay its debts.
In the presentation published today, JEC management asserts, "According to the company's projected cash flow, even under stress tests resulting from the recent events in Russia, the company has a projected positive cash flow and financial and operational flexibility. The company believes that these factors enable it, under its working assumptions, to cope with the recent events."
JEC mentioned that during 2012-2014, it and its subsidiaries sold properties in Israel and overseas, thereby reducing its debt by NIS 4.9 billion and providing it with NIS 2.3 billion in free cash flow from them. According to JEC management, the group intends to continue implementing this strategy in the coming two years by selling properties that will reduce its debt by at least NIS 2.4 billion and create at least NIS 1.1 billion in free cash flow.
Company management added that even if it is assumed that it does not receive NIS 28 million in scheduled payments from Mirland, and that the company abandons its planned NIS 150 million bond issue in 2015, it will have enough cash to service its debt until the end of September 2016. This also assumes that its other subsidiaries continue to pay dividends according to the original plan, and that the company itself refrains from distributing a NIS 150 million dividend during this period.
In the stress tests conducted by the company with respect to the materializing of an extreme scenario in which the NIS 739 million balance of its investment in Mirland is completely written off as a result of the crisis in Russia, it was found that the company will still meet the financial criteria stipulated in its bond series.
Eliezer Fishman is the controlling shareholder in "Globes."
Published by Globes [online], Israel business news - www.globes-online.com - on December 28, 2014
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