Investor: Africa-Israel's company value is zero

Major institutional investor: Investors believe that there will be a settlement.

Capital market sources describe as "trial balloons" the latest measures by Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) to reach a debt settlement, including the proposed structure of a settlement. A major institutional investor told "Globes" today that the starting point of any negotiations is simple: the company's liabilities are greater than its assets; in other words, the company belongs to its creditors. "Africa-Israel's market cap is irrelevant, because it reflects a settlement, while the company cannot meet its liabilities. Its value is zero. It's currently traded at a market of NIS 2.4 billion, because investors believe that there will be a settlement," he said.

"The question is to what extent is Africa-Israel chairman Lev Leviev willing to put his hand into his pocket and put money in the company to keep control," the source said. "It will have to be substantial, otherwise, there's nothing to talk about."

Africa executives will hold a round of meetings with bondholder representatives in the coming days. Global Finance Ltd., Menorah Mivtachim Holdings Ltd. (TASE: MORA), and Yelin Lapidot Ltd., are representing the short-term bondholders. Psagot Investment House Ltd., Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), Menorah-Mivtachim, and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) ., are representing the long-term bondholders. Capital market sources believe that Africa-Israel will have to greatly improve its offer if it wants to reach a settlement, and that Leviev will have to inject considerable capital into the company if he wants to keep control of it. The sources believe that the process will be complex and take months.

"NIS 300 million won't leave Leviev in control," a Psagot executive told "Globes" earlier, in response to rumors that Leviev would inject up to NIS 300 million into Africa-Israel. "If Leviev wants to keep control of the company, he'll have to inject a lot more than NIS 500 million."

The major institutional investor said, "Under the present terms, I doubt that there will be a settlement. There are conflicts of interests between the bondholders. At the last bondholders meeting, private bondholders turned up and there was a whole mess. So far, Africa-Israel's management has behaved in a way that will prevent a settlement. They're playing hardball, Leviev doesn’t want to inject capital while he wants to keep control, they've tried to scare us that the value in Russia will vanish if Leviev loses control."

Africa-Israel's share rose 4.8% in early trading to NIS 45.60

Published by Globes [online], Israel business news - www.globes-online.com - on September 29, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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