Amir Barnea got a short grace period following his appointment late last week by Africa Israel as consulting mediator to work with bondholders of the 12 largest series.

The time was to have been dedicated to studying Africa Israel's convoluted business, but it looks like the grace period is over today as Barnea, together with the heads of Africa Israel - controlling shareholder Lev Leviev, CEO Izzy Cohen and deputy chairman Nadav Grinshpon - must now study the draft proposal received from representatives of the company's bondholders.

The representatives, which include delegates on behalf of the Psagot and Migdal Capital Markets investment houses and the insurance companies Menora-Mivtachim, Clal and Harel, held a long and stormy meeting on October 12 and were finally able to produce a draft agreed on by all parties - more or less. The details of the proposed debt arrangement for Africa Israel's NIS 7.5 billion debt to bondholders, are revealed here for the first time.

The arrangement is also subject to the approval of the banks, to which Africa Israel owes another NIS 500 million.

Leviev to keep limited control

The banks hold liens on a substantial portion of Africa Israel's shares guaranteeing loans totaling NIS 2.5 billion that Leviev took through his privately owned company, Memorand, to acquire additional shares in Africa Israel and further strengthen his control of the company.

Under the debt arrangement proposed by bondholders, institutional investors demand that Leviev inject NIS 1 billion into the company. This amount plus another NIS 500 million in Africa Israel's coffers are to be used to pay bondholders of the B13 series (one has separate representation) due in the immediate future.

The payment schedule will give preference to the shorter series, like Series B9, to whom Africa should pay NIS 550 million this November, and Series B24, who will receive NIS 160 million in April 2010.

It is unclear how the amounts are to be divvied up.

Under the proposal, following Leviev's cash injection his stake will be diluted from 75% to about 45%, and institutional investors and the public, which currently own approximately 25% of the company, will receive another 40% or so through a new share issue.

Leviev will continue to be the controlling shareholder of Africa Israel after the debt is resolved. Leviev will have the option to increase his stake to 51% in exchange for an additional cash injection. Mechanisms will be put in place to protect the company against a hostile takeover.

Bondholder representatives suggest that Africa roll over NIS 3.5 billion of its debt to bondholders through an issue of one or two new long term bond series yielding 6%.

Another NIS 1.5 billion of the debt will be converted to shares of the group's public subsidiaries, which include AFI Development, Africa Properties and Danya Cebus.