Two months after the bondholders in failing real estate company Scorpio Real Estate Ltd. (TASE: SCRP.B1) rejected a debt arrangement proposed by billionaire Beny Steinmetz, Scorpio's controlling shareholder, Scorpio is making another proposal. The company today published principles for a possible new debt arrangement that it hopes the bondholders will approve. Like the previous proposal, the new proposal also includes a one third reduction in the debt, from NIS 240 million to NIS 160 million. The difference between the proposals is that under the current proposal, the remaining bond principal will be repaid in four gradually increasing payments, including a minimum payment of NIS 20 million by June 30, 2016, rising to an NIS 80 million minimum payment by June 30, 2019, when it also undertakes to repay the remaining principal to the bondholders. Under the previous proposal, payments would not have begun until June 30, 2019.
As far as is known, one of the reasonsthat the previous proposal did not succeed was that the some of the bondholding institutions, headed by Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), demanded an enforceable personal guarantee as a condition for its approval. Scorpio is now claiming that Steinmetz will guarantee the payments, with the company providing the bondholders' trustee with confirmation from a lawyer that the foreign companies in which Steinmetz was "a beneficiary or one of the beneficiaries (even though he is not involved in their management, does not control them, has no influence over them, and it is by no means clear that that he received money from them)… have a surplus of assets over liabilities" greater than the amount to be repaid. Scorpio added, "The parent company and the controlling shareholder in the company shall not be entitled to repayment in respect of the company's debts to them as long as the reduced bond debt has not been fully repaid."
Scorpio has been in a difficult state for quite some time, and the further decline in its situation, which led to the current debt arrangement proposal, came in 2014, following the tension between Russia and Ukraine, which disrupted the company's business in these countries. As a result, the group's financial statements havecarried a going concern warning for a considerable time. The company's first debt arrangement, amounting to NIS 570 million, came in 2011, with Steinmetz injecting $100 million into the company in exchange for rescheduling of the debt.
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016