Shlomo Dovrat's Viola Group unit Viola Credit will provide Ilan Ben-Dov's Suny Electronics Ltd. (TASE: SUNY) and its subsidiary Scailex Corporation (TASE: SCIX; Pink Sheets:SCIXF) with NIS 250 million in loans. Suny, at the top of Ben-Dov's pyramid, will receive NIS 50 million, which will serve for part of the company's debt settlement that is being drawn up; and Scailex will receive NIS 200 million, which will enable it to meet its bond payments over the coming year, even without dividends from its main holding, Orange franchisee Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR).
Viola Credit (formerly Plenus Venture Lending Fund, which manages more than $320 million, specializes in loans to technology, manufacturing, and retail companies. The Consumer Price Index (CPI) linked loans to Suny and Scailex will be for four years and bear 7% annual interest. Viola Credit has the right to a bonus of 3% of the loans when they is granted, and an additional payment of 2% of the loans' amount when they mature. Suny and Scailex will cover the loans' costs, bringing the effective weighted interest rate to 9.3% a year.
Viola Credit will also receive kickers: Suny will give the firm an option to buy 3.75% of Scailex; and Scailex will give the firm an option to acquire 4% of its capital at a value to be set by an assessor, and a second option to acquire 11% of its capital, at the average market cap during the 30 days preceding the granting of the loan.
Suny will use the loan to repay its NIS 28 million loan from Mizrahi Tefahot Bank (TASE:MZTF), and Viola Credit will obtain a lien on 1.4% of Partner's shares held by Suny. The stake is currently worth NIS 48 million. Scailex will not give Viola Credit any collateral, but it must meet the financial covenants, which will the parties will set.
The loans are subject to Suny reaching a debt settlement, which will guarantee that the company will not be in breach with its bondholders, to whom it owes NIS 250 million. Early next week, the bondholders will convene to vote on Suny's proposed settlement, reached after negotiations with them. The settlement includes Ben-Dov transferring bonds with a nominal value of NIS 10 million to the company in exchange for an issue of capital notes, which will become subordinate debt, and the sale of Suny's stakes in Internet portal Tapuz People Ltd. (TASE:TPUZ) and in collision warning systems developer Mobileye Ltd.
Suny will issue two new bond series, one regular and the other convertible for Suny shares, which will be repaid in three equal payments after 4.5 years and bear an effective interest rate of 2.8%.
Suny and Scailex's auditor attached a going concern warning to their financial reports for 2012. Scailex lost NIS 851 million in 2012. The warning was because of its shareholders' equity deficit of NIS 281 million at the end of the year, and Partner's decision not to distribute a dividend on its 2012 profits. Suny lost NIS 716 million in 2012, and has been insolvent for a long time, with no cash reserves at all.
Scailex also announced yesterday that it is considering raising NIS 50-100 million through a private bond placement to investment institutions, either by expanding its Series F Bond, or issuing a new one. The company withdrew a planned bond offering in November 2012, after selling the controlling interest in Partner to Saban Capital Group Inc.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2013
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