Disagreements between Lev Leviev's private company, Memorand Management (1998) Ltd. (through which he controls Africa-Israel Investments Ltd. (TASE:AFIL), and its creditor banks are escalating. Sources inform ''Globes'' that Leviev and some of the lender banks are initiating a new settlement to reschedule Memorand's NIS 2 billion debt. Under the proposed settlement, Memorand will repay the debt early in exchange for lower interest payments, estimated at NIS 300 million.
Memorand owes its largest creditor, Bank Hapoalim (TASE: POLI) NIS 1.3 billion. The bank led Leviev's 2009 debt settlement for Memorand and Africa-Israel.
Mizrahi Tefahot Bank (TASE:MZTF) opposes the proposed settlement for Memorand. In a sharply-worded letter to Leviev today, it demanded that he pay NIS 100 million in guarantees to the banks within three business days, as stipulated in the previous agreement, irrespective of any new settlement. Mizrahi Tefahot threatens immediate repayment of Memorand's NIS 170 million debt to the bank if it does not make the payment.
Other banks are still sitting on the fence and have not yet decided whether to enter into negotiations with Memorand on the proposal or to join Mizrahi Tefahot Bank's militant position. "Earlier repayment of the debt in exchange for a discount is normal practice. The question is the amount. At the moment, it seems that the discount is too much, but the proposal should be examined," said one of the fence-sitting banks.
Memorand said in response, "Memorand, as a private company, does not discuss its business matters."
Memorand's original debt to the five big banks - Bank Hapoalim, Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), Mizrahi Tefahot Bank, and First International Bank of Israel (TASE: FTIN) - was NIS 3.1 billion, and it has since been reduced to NIS 2 billion. Memorand's main collateral is its shares in Africa-Israel. Memorand's 47.3% stake in Africa-Israel has a current value of NIS 630 million, a third of the debt. The banks have other collateral as well.
Since Memorand's first debt settlement with the bank in 2009, at the same time as Africa-Israel's NIS 7.4 billion settlement with its bondholders, Africa-Israel's share price has plummeted 80%. The resulting loss of value of the collateral forced the banks to make write-offs on credit losses. However, a top banker believes that the banks will not make any write-offs for Memorand in their financial reports for the third quarter.
The sources added that the banks reached a settlement with Leviev in 2011. Under the settlement, for the banks to avoid making additional write-offs, if the value of Africa-Israel's shares fall below their value of September 2011, Leviev will make up the difference by giving additional collateral or repaying part of the debt. Africa-Israel's share price has since fallen by an additional 30%, and Leviev has had to make up the NIS 100 million difference.
Bank Hapoalim is Memorand's largest creditor, followed by a wide margin by Bank Leumi and Discount Bank, each of which are owed NIS 200 million, followed by Mizrahi Tefahot Bank, which is owed NIS 170 million, and First International Bank, which is owed NIS 130 million.
Published by Globes [online], Israel business news - www.globes-online.com - on November 6, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012