While feverish talks on a settlement between Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY) with bondholders have not formally begun, behind the scenes there are contacts between the company and institutional investors. Sources inform ''Globes'' that the burning issue is chairman Lev Leviev's control of the tottering real estate empire.
Leviev owns 74.8% of Africa-Israel, though all his shares have been put up as collateral with the banks. A top market source told "Globes" that Leviev is prepared to cede control of the company as part of a settlement that will include converting part of the debt into equity. However, as part of a settlement, he insists on receiving the option to gain back control of the company at a later date when the value of the company's properties increase, its condition improves, and it can repay its debts.
For now, the banks and institutional investors oppose Leviev's demand, and the issue is under discussion. If Africa-Israel's creditors agree to the demand, and convert a substantial part of the company's debt into equity, the company's shareholders will see a massive dilution of their holdings, which theoretically will result in a drop in the share's value.
Africa-Israel's share fell another 10% by midday today to NIS 43.30, giving a market cap of NIS 2.66 billion. The share is now down over 30% since, on Sunday, the company published its dismal second quarter financial report and announced that it will have trouble paying its bondholders.
An Africa-Israel spokesman said in response, "The company has no intention of commenting about rumors and talks, because we already said that when we have a settlement, we will announce it."
Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2009
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