Africa Israel falls on debt talks

Africa Israel Investments Ltd., the real-estate company owned by diamond mogul Lev Leviev, fell the most in nine months in Tel Aviv trading after saying it will start talks with bondholders to restructure its debt.

Africa Israel dropped as much as 30 percent, the biggest decline since Nov. 13, and was down 25 percent at 51.86 shekels as of 1:26 p.m. in Tel Aviv.

“It has become extremely difficult to get new loans and refinance our debt,” Chief Executive Officer Izzy Cohen said today at a press conference in Tel Aviv. “We still haven’t seen a recovery in the markets in the U.S. and Russia. We are still very much negatively affected by the world crisis.”

The Yehud, Israel-based company, struggling to cope with a decline in real estate prices, has been selling property to meet its debt obligation. It has paid off 3.3 billion shekels ($864 million) in loans since January 2008 and still has 7.5 billion shekels to pay, Africa Israel said today in a statement. Africa Israel Group has debt of 21 billion shekels, it said.

“We are sure we can end this crisis smoothly,” Leviev, who chairs the company, said at the press briefing. “Given the conditions in the economy, this was the most responsible step.”

The slump in Manhattan property prices has particularly hurt Africa Israel, which bought the former New York Times building for $525 million in 2007 and other commercial real estate. The company’s investments in the U.S. were its biggest mistake, Leviev said today.

Loss Expands

Africa Israel also said its second-quarter loss widened to 1.32 billion shekels from 91 million shekels a year ago. The loss was mainly a result of a drop in the value of property under construction and an increase in financing costs, it said.

The restructuring will be fair to all sides, Cohen said, declining to give details on the terms under negotiation.

The company’s shares plummeted 91 percent last year as a decline in global property prices drove the value of its assets down, prompting concern it may be forced to default. Since the start of 2009, Africa Israel has focused on selling assets, including a stake in New York’s historic Clock Tower, and buying back bonds to increase liquidity.

The yield on the company’s notes due in 2014 jumped by 8 percentage points to 27 percent, pushing the price of the 4.8 percent securities down by 15.28 shekels to 48.48 shekels.

“The company’s assets are not yielding enough to pay back their debt so they’re now facing up to the facts,” said Moti Berliner, an analyst at Meitav Investment House Ltd. in Tel Aviv. “They will be able to reorganize their debt because it is in the interest of the bondholders to see the company survive, but there will be a higher cost.”

Source: Bloomberg

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