Africa offers bondholders enticement to switch series
The decision to update the interest on the new series from 6.0% to 6.5% reflects the company's desire to encourage investors to convert their old bonds for the new series.
Africa-Israel Investments is sweetening its terms in a bid to encourage bondholders to switch to a new series: The new series, B27 (kaf-vav), will now carry guaranteed interest of 6.5% instead of 6.0%, the company said Tuesday.
In April the firm, controlled by real estate tycoon Lev Leviev, originally announced its offer to bondholders of its B26 series, its only publicly-traded series at the moment. The investors would convert their holdings to B27 bonds.
The main difference is that they will receive repayment sooner. But another important consideration is interest: The current series carries average interest of 7%, but this is variable and anyone buying it now would enjoy a 7.5% return.
The decision to update the interest on the new series from 6.0% to 6.5% reflects the company's desire to encourage investors to convert their old bonds for the new series. The deadline for accepting the offer is this Sunday, June 17.
Series B26 was issued in May 2010 when Africa entered a debt restructuring arrangement with bondholders. The bonds gave Africa a three-year grace period on repaying its NIS 3.8 billion in principal, to be spread out equally over 13 years from 2013 to 2025.
Repayment of the series B27 principal, however, will be moved up to early July this year for the 18% of total principal otherwise owing in 2013 and 2014 and part of the sum otherwise payable in 2015. This lowers the risk of investing in the series, but at the cost of interest income. Since the bonds won't be entirely redeemed until 2025, the difference could be substantial.
The company, with NIS 900 million in its coffers following its recovery and unloading of activities and U.S. properties, seeks to reduce its financing costs. Issuance of the B27 bond series was made conditional on a minimum 25% response rate and a maximum 75% among B26 holders, putting the new series at between NIS 900 million and NIS 2.8 billion.
Africa apparently set the maximum limit in accordance with its spending target for the early July payment: NIS 511 million, which would leave the company with about NIS 400 million in cash.