Lev Leviev-controlled Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY.PK) paid only the interest, not the principal, on its Series 9 bonds that mature today.
Africa-Israel transferred to the Tel Aviv Stock Exchange (TASE) clearing house only the NIS 11.43 million interest payment due (4.2% annual coupon rate), but not the full amount of principal and interest which together total about NIS 550 million.
Series 9 bondholders claim Africa-Israel is able to pay them in full on time. The company claims that doing so shows preferential treatment to a group of bondholders. Africa-Israel has 13 series of bonds, and investors in the other series can now demand immediate repayment after the company missed a principal payment.
Adv. Guy Gissin, the attorney for the Series 9 bondholders, said, "The company has the capital and assets to meet its obligations. The problem is the desire to do so. Africa-Israel intended to reimburse us, but withdrew because of fears that holders of other medium term bonds will also demand reimbursement."
The fact became known during a Global Finance bondholders meeting this morning in Citi Tower in Tel Aviv. The Global Finance meeting was called urgently, ahead of the full Series 9 bondholders meeting this afternoon.
At the beginning of the stormy Series 9 bondholders meeting, attended by many private investors, an investor named Orli told "Globes", "I expect to see most of my money back. There is a clear preference of creditors here, in favor of holders of long term bonds, and banks. The proof is that since the bondholder agreement, prices of those bonds have risen, while the short term bond prices have fallen significantly. I invested NIS 300,000 and the money went. The advisor at the bank told me it would be OK."
Global Finance has about NIS 150 million exposure to Series 9 bonds. Today's payment was supposed to be about NIS 550 million, so Global Finance has about one third of the issue.
Published by Globes [online], Israel business news - www.globes-online.com - on November 10, 2009
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