The Africa Israel Investments board of directors yesterday approved the final proposed debt arrangement hashed out between the company's management, its controlling shareholder Lev Leviev and its bondholders. The company owes its bondholders about NIS 7.5 billion.
The arrangement was reached after months of negotiations between bondholders' representatives and company officials.
On Sunday, Africa Israel asked the court to schedule a joint assembly of bondholders and shareholders on March 14. Once the court approves it, Africa Israel will send out summonses to its shareholders and bondholders, along with the pertinent information they need to vote on the proposed plan.
Meanwhile, yesterday the Israel Securities Authority announced that in 2009 it sent envoys to Russia, among other things to inspect properties belonging to Africa Israel. The ISA clarified that it finished the audit and delivered its findings to Africa Israel in January.
Africa Israel operates in Russia through a subsidiary, AFI Development.
Africa Israel said yesterday that the ISA's findings would "find expression" in announcements at the assembly of shareholders and bondholders. In English, it will share the findings.
Among other things, Africa Israel will increase disclosure about its rights to various assets in Russia, and will elaborate on its exposure to legal risks.
The company stressed that the ISA's findings are not relevant to the terms of its debt arrangement or to the basic value of the company.
After real estate firm Africa Israel asked the court to schedule an assembly of bondholders and shareholders, the Israel Securities Authority answered questions related to that request.
Why did the Securities Authority send appraisers to Russia?
It actually sent the appraisers even before Africa Israel said it wanted to reschedule its debt, the ISA explains. The move had nothing to do with the debt arrangement. The corporate finance department at the ISA routinely audits large-cap companies, the watchdog explains.
Africa Israel's activity in Russia met many of the ISA's audit criteria. The company, which is controlled by Lev Leviev, is a large-cap, and moreover, operates in real estate, a key troubled market during the global economic crisis. It operates widely in Eastern Europe, one of the more troubled regions. Its financial statements are based on property valuation estimates and it has borrowed huge amounts from the public ? it owes about NIS 7.5 billion to bondholders.
What alarm bell went off at the Securities Authority that spurred the mission?
The ISA aims to systematically review the appraisals underlying financial statements by Israeli companies in general, and those of Israeli companies operating in Eastern Europe in particular.
For this purpose, the ISA auditors have to see the assets in person. The ISA wants to examine the state of their planning, other properties the company may own, and to talk with players in the foreign market. The aim is to assess whether the valuation of the properties adheres to the norm in that market.
These in-depth audits have become part of its routine, the ISA stresses, and if anything the number of audits increases each year. Each review typically takes months, the ISA adds. It had presented its findings to the Africa management in January.
Will the review affect the Africa Israel bondholder debt arrangement?
What the audit achieved is far greater disclosure of the company's operations in Russia than had been provided by Africa itself, the ISA says.
