Elbit Imaging's bondholders Wednesday demanded that the real estate holding company rescind a decision not to make a NIS 67 million principal payment due on its Series Aleph and Bet bonds.
The demand came a day after Elbit Imaging's board approved the step. To avoid being declared insolvent, the board did, however, say it would make NIS 15 million in interest payments due on the bonds.
Although Elbit Imaging has NIS 116 million in cash to meet the payments, the board voted against making what is seen as the first step in a bid by the company to reschedule its NIS 2.2 billion in bond debt. That will put Motti Zisser, who controls Elbit Imaging, in the company of tycoons like Nochi Dankner, Yitzhak Tshuva and Lev Leviev who have turned to bondholders for relief on crushing debt.
Elbit's Series Aleph bonds tumbled 25% on Tuesday in Tel Aviv Stock Exchange trading following the announcement and fell another 3.7% yesterday. Its Series Bet bonds fell 7% Tuesday and 5.% yesterday.
Meanwhile, S&P Maalot downgraded Elbit Imaging debt five notches, from B to CC, just one notch above default.
Elbit Imaging got into trouble from investments in hotels and shopping centers it owns and develops in the real estate trouble spots of Central and Eastern Europe.
The total value of the bonds in question is about NIS 107 million, which is a small part of Elbit's total debt, but bigger issues are at stake. Investors holding Elbit Imaging's long-term bonds are pressing the company not to make any payments to the holders of the short-term bonds. The holders of Elbit's long-term bonds fear that the short-term holders will get their money back, depleting the company of cash it will need to pay them later. In addition to stopping the February 20 payment,
Elbit also agreed to delay collecting a 30 million euro dividend from its Plaza Centers unit that it was counting on for liquidity. The decision came in response to pressure from investors holding Plaza Centers bonds, who are concerned about its ability to repay NIS 1.2 billion owed them.
Plaza Centers is scheduled to repay NIS 700 million to bondholders, but it has only NIS 320 million cash.