As Africa Israel Investments is in talks about debt relief, a report this week that the property company donated 100 million shekels ($26.2 million) over the last six years – even as Lev Leviev’s indebted property company was still recovering from a previous bailout – has raised the ire of bondholders.
Channel 2 television reported that Africa Israel had given the money to unnamed charitable organizations, more than 90% of them based in Russia, to which its controlling sharerholder, Lev Leviev, is connected.
The news comes as the company has been writing down the value of its Russian property portfolio as the Russian economy struggles with recession and the value of the ruble has plummeted. The Russian bank VTB, one of the creditors to Africa Israel’s AFI Development unit, is expected sometime in the next several days to get control of the company’s AFI Mall in Moscow in lieu of repaying debt.
“We find it unacceptable that a company that hasn’t been able to repay money to its creditors is making donations to third parties,” Dan Avnon, who is representing Africa Israel’s bondholders, said in response to the Channel 2 report.
Africa Israel defended the donations, which were presumably chosen by Leviev personally, although no details about them have been released.
“Africa Israel sees itself as committed to active involvement in society and the community in which it operates together with its business operations and entrepreneurship. In this spirit, all of Africa israel’s subsidiary companies undertake a wide range of community activities in the countries they operate, which is expressed among other ways in money donations and voluntary activities,” the company said.
It said that AFI Development had regularly contributed to Jewish institutions in Russia. “In the last two years, with the worsening of economic conditions in Russia and at AFI Development, the contributions have been reduced,” it added.
In fact, reported charitable donations last year dropped to 12 million shekels from a peak of 19.8 million in 2014.
Shares of Africa Israel, which have lost nearly two thirds of their value in the past year, closed down 0.6% to 3.46 shekels yesterday. The company nearly three weeks ago asked bondholders holding 3.2 billion shekels of debt to negotiate new terms, the second time in six years the company has sought debt relief from what was then 7.4 billion in debt.
However, bondholders have said they are unlikely to agree if Leviev himself doesn’t inject more capital into the company. If not, they could end up wresting control of Africa Israel, which Leviev acquired and led for two decades.
The issue of Leviev’s injecting his own capital into the company has been complicated by his continued high living even as the company struggles and he contends with private debt to the banks estimated at about 1 billion shekels, down from 2 billion seven years ago.
Leviev, who moved his principal place of residence to London in 2008, is right now building a giant compound in the Tel Aviv suburb of Savyon. He purchased the land in 2006 for 60 million shekels and is believed to be spending another 25 million building a 700-square meter home on the 15-dunam site.
Bondholders say his personal role in the company’s disastrous decision to invest in Russian real estate should also be a factor.
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