Hermetic Trust Services, the trustee for the three bond series of Africa-Israel Investments Ltd. (TASE:AFIL), today published an urgent notice for a bondholders meeting to be held this Tuesday. The meeting will convene to discuss the bid made by US investment fund Westport Capital Partners to buy Africa-Israel 's shares, as part of a debt arrangement with its financial creditors.
According to the notice, the fund had submitted a non-binding proposal for talks with the trustee and the representatives of the holders on a debt arrangement which, Westport believes, should include the acquisition of all Africa-Israel shares, in exchange for capital injection and a creditors' arrangement. The trustee announced that it will publish the entire bid before the meeting.
While the notice indicated that the Westport fund offered to start talks with the trustees, representatives and the company, the offer was contingent on the convening of an urgent holders' meeting which will enable the fund to conduct exclusive negotiations alongside various protections if another bid is eventually accepted and approved. The trustee said that the fund has made no preliminary agreements will the holders' representatives and that this is a one-sided proposal.
Westport Capital Partners is a Connecticut-based US real estate investments fund, founded in 2005 by Russel Bernard. Various financial institutions and private investors have invested $1.8 billion in the fund, which specializes in pursuing investment opportunities in real estate companies worldwide which are undergoing financial hardship.
Debt is larger than the value of assets
About six months ago, Africa-Israel , controlled by Lev Leviev, announced that it seeks to reach a second debt arrangement with bondholders, due to a sharp erosion in the value of its properties in Russia, which caused it to report a negative net asset value (NAV) of hundreds of millions of shekels. Two months ago, Africa-Israel completed the sale of its stake (65%) in its subsidiary AFI Development plc (LSE:AFID), which operates in Russia, to Africa-Israel 's controlling shareholder Leviev for NIS 550 million in cash, used to pay off debts to bondholders. Nevertheless, the company's debt still totals NIS 2.8 billion, exceeding the value of its assets by hundreds of millions of shekels. Talks between Africa-Israel management and bondholders have been based on the assumption that it will be possible to keep Africa-Israel as a going concern only if hundreds of millions of shekels are injected (by Leviev and/or other investors), for a debt write-off of at least NIS 1 billion. These negotiations have been ongoing for many months with no real results so far. Alternatively, bondholders have also considered trying to sell Africa-Israel's assets separately, but no progress has been made in this direction as well (other than the sale of AFI Development to Leviev). Africa-Israel's main assets are: a 54% stake in Africa-Israel Properties Ltd. (TASE: AFPR), with a market cap of NIS 1 billion; a 74% stake in Africa-Israel , Africa-Israel Residences Ltd. (TASE:AFRE), with a market cap of NIS 700 million; a 73% stake in Africa-Israel Industries Ltd. (TASE: AFID), with a market cap of NIS 70 million; and 100% holdings in Danya Cebus Ltd. (TASE: DNYA), as well as a 50% stake in Africa Israel Hotels (TASE: AFHO), estimated at hundreds of millions of shekels overall.
Published by Globes [online], Israel business news - www.globes-online.com - on November 13, 2016
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