Real estate developers Profit Building Industries Ltd. (TASE: PROB), New Horizon Group Ltd. (TASE:NERZ), and Intercolony Investments Ltd. (TASE:INTCL) (formerly American Colony) all reported last week that they received ultimatums from Romanian banks over non-compliance with credit covenants. The developers are not too concerned; the banks know that the collateral for the credit - the properties - are worth less than the debt.
Most Israeli-backed developments in Romania still exist only on paper, and few are actually under construction. The developers raised capital in bond issues on the Tel Aviv Stock Exchange (TASE), which was used to leverage projects in Romania.
Romania is in the throes of a severe economic crisis, and despite government efforts to jump start the economy, people prefer to postpone purchases of apartments in expectations that prices will continue to plunge.
Profit Building and New Horizon announced that Romania's Alpha Bank is recalling a loan for a project in Pitra Neamt outside of Bucharest. Profit owns 31.25% of the project company Polivalenta Building srl, and New Horizon owns 25%. The bank is demanding €781,000 from Profit and €625,000 from New Horizon by Tuesday August 10, otherwise it will foreclose the collateral on the €2.5 million loan. The company is trying to reach an agreement with the bank, and is reviewing its options.
Intercolony's Romanian subsidiary Intercolony Investments srl was notified by BankPost SA to repay a €5.2 million loan by August 10 for a project that the company books at a value of €6.1 million.
Published by Globes [online], Israel business news - www.globes-online.com - on August 8, 2010
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