Moti Ben-Moshe’s acquisition of the ailing holding company Alon Blue Square was in jeopardy Wednesday after bondholders threatened to scuttle the deal amid a battle with Bank Hapoalim about who would get the proceeds from the sale.
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Investors holding Series Aleph bonds issued by Alon Israel, which agreed Tuesday to sell its 72.7% stake in Alon Blue Square to Ben-Moshe, are insisting that Alon Israel keep the proceeds. But Hapoalim is adamant that the money go toward paying the 335 million shekels ($85.9 million) that Alon Israel owes the bank.
Bondholders are scheduled to meet today to vote on the deal. Shares of Alon Blue Share fell 6.4% to 1.24 shekels on the Tel Aviv Stock Exchange Wednesday.
The conflict comes just a day after Ben-Moshe — an Israeli who made his fortune in Germany and has been seeking to enter the Israeli business scene — agreed to buy Alon Blue Square for just 115 million shekels.
The bondholders are in a position to block the sale, after the credit rating agency Standard & Poor’s Maalot lowered its rating on the 1.75 billion shekels of the Series Aleph bonds at the end of January. The downgrade entitles bondholders to call in the debt immediately, an amount the company is in no position to repay, and force into receivership.
Ben-Moshe on Wednesday refused the bondholders’ demand to raise the payment to 170 million shekels. Ben-Moshe hinted that if he couldn’t buy control of Alon Israel now, he would wait for a court to declare it insolvent and buy it without paying anything to Alon Israel shareholders.
Hapoalim executives made the same threat, telling bondholders that if they don’t approve the Ben-Moshe deal today, a receiver would be named for Alon Israel who would sell the 70% of its shares pledged to the bank as collateral. That would deprive Alon Israel of the 115 million shekels it is due to receive.
To complicate things further, holders of Alon Blue Square’s Series Gimmel bonds said Tuesday night that if the sale of the company is not approved they will seek immediate repayment of 380 million shekels owed to them.
Meanwhile, Ben-Moshe is debating what to do with one of the key assets of Alon Blue Square, the AM:PM grocery chain.
As an observant Jew, he would like to either sell AM:PM, some of whose 44 stores are open 24/7, including on Shabbat and Jewish holidays, or bring the hours of operation into line with Jewish religious law.
Closing the stores on the Jewish Sabbath and holidays would present legal issues because the stores are controlled through a publicly traded unit, Dor Alon. Nearly one-third of AM:PM sales are on Shabbat and the stores enjoy enormous gross profit margins — equal to 33.7% of sales — so he would have trouble justifying Sabbath closures on business grounds.