The potential bid includes a NIS 700 million capital injection and a NIS 400-450 million debt write-off.
One year after escaping from his investment in IDB Development Corporation Ltd. (TASE:IDBD) by the skin of his teeth, and a few weeks after completing the takeover of Alon Holdings Blue Square – Israel Ltd. (NYSE: BSI; TASE: BSI), Moti Ben-Moshe has been negotiating a possible investment in the controlling core in a third troubled holding company involved in debt arrangement negotiations: Africa-Israel Investments Ltd. (TASE:AFIL).
Sources inform “Globes” that two weeks ago, Ben-Moshe presented Africa-Israel bondholders with an outline for a NIS 700 million investment in the company, combined with a write-off of only NIS 400-450 million in the company’s debts to its bondholders, with no negotiations.
Sources close to representatives of the Africa-Israel bondholders today asserted that Ben-Moshe’s offer appears “serious and good.” At the same time, given the period of the holidays and the various tough conditions posed by Ben-Moshe as basic conditions for his investment, the negotiations have made no further progress.
Controlled by Lev Leviev, Africa-Israel has been negotiating a debt arrangement with its bondholders since last May.
Up until now, a proposal for a NIS 1 billion write-off in exchange for an allocation of most of the company shares to the bondholders has been discussed, following by a capital injection in the hundreds of millions of shekels by either Leviev or another investor in exchange for an allocation of shares constituting a controlling core in the company.
As a preliminary stage for the debt arrangement, Africa-Israel completed in early September the sale of a 65% controlling interest in its subsidiary, AFI Development plc (LSE:AFID), to Leviev, Africa-Israel’s controlling shareholder, for NIS 550 million.
The proceeds will be used for early repayment of some of the debt to the bondholders. Following the sale, Africa-Israel was left with business in infrastructure, residential construction, commercial properties, hotels, and construction products in Israel. The company also operates in income-producing real estate in Europe.
AFI Development was Africa-Israel’s real estate arm in Russia, and has been regarded as Leviev’s favorite since its founding. Following the sale of control in AFI Development to Leviev, Africa-Israel reported it would post a NIS 2.4 billion capital loss on the deal, giving it a NIS 180 million equity deficit as of the end of the second quarter.
The early repayment of bond debt reduced Africa-Israel’s debts to its bondholders to NIS 2.8 billion, but the company must still reach a debt arrangement with the bondholders that will include the conversion of NIS 1 billion of the debt into Africa-Israel shares. Africa-Israel’s bonds are currently traded at an annual yield to maturity of 20%-24%, while the company share price reflects a NIS 240 million market cap, although the company has a negative net asset value (NAV).
From Elsztain to Leviev
Ben-Moshe has become a familiar in the local capital market only in recent years, after he acquired the controlling interest in IDB Holding Corp. Ltd. (TASE:IDBH), together with Eduardo Elsztain, in early 2014 in the framework of a debt arrangement, after the company collapsed financially and was taken away from previous owner Nochi Dankner.
Only a few months later, however, relations between Elsztain and Ben-Moshe went awry, following disagreements on what the concern should do.
They parted ways a year ago, when Elsztain acquired the holdings of Ben-Moshe, who posted a heavy NIS 530 million loss on his investment in IDB in less than two years.
Ben-Moshe, however, did not give up on his quest for a stake in local holding companies.
The enigmatic businessman recently completed his acquisition of full ownership in Alon Blue Square, again as part of a debt settlement. Alon Blue Square was formerly part of the Alon Group, controlled by Shraga Biran, David Wiessman, and the kibbutzim.
Alon Blue Square suffered from acute liquidity problems, after the failure of its attempts to support the Mega chain, which it owned. The company turned to its creditors the banks and its bondholders – in February with a request for negotiations on a debt arrangement.
The creditors preferred Ben-Moshe’s offer to the one by Gindi Holdings
Ben-Moshe was selected by the creditors after agreement to inject up to NIS 900 million into Alon Blue Square within three years to cover its debts, while at the same time acquiring full ownership of the company for payment of NIS 115 million to Alon Group, the current controlling shareholder a total payment of NIS 1 billion.
Ben-Moshe has actually paid the Alon Group NIS 114 million, plus NIS 7 million more to the minority shareholders in Alon Blue Square, in exchange for full control of Alon Blue Square. Ben-Moshe injected NIS 300 million more into the company on the date on which the sale was completed.
The company recently estimated that Ben-Moshe would have to inject NIS 100 million more next year, making his total investment NIS 500 million.