Property developer Gindi Holdings agreed over the weekend to buy control of Alon Blue Square after a day of breakneck negotiations conducted under the shadow of creditors closing on the embattled holding group.
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Alon Blue Square said Gindi would pay just 115 million shekels ($29 million) for the 72.7% controlling stake held by Shraga Biran, David Weismann and the kibbutz purchasing organization. Gindi will also take on 1.2 billion shekels of Alon Blue Square debt, it said.
If completed, the deal will free Alon, the closely held company controlled by the three, from any obligations connected with the Mega supermarket chain, which is now in receivership. It also removes the threat of having to repay 1.75 billion shekels to its bondholders immediately.
For Gindi Holdings, the deal will gain it control of Blue Square Real Estate, the holding company’s property arm, which had been for sale separately and had fetched offers of as much as 1.8 billion shekels. Blue Square Real Estate has 115 commercial properties, most of it commercial space rented to Mega supermarkets.
Alon Blue Square acted quickly to complete a deal with Gindi after the credit agency Maalot lowered the rating for its parent company Alon’s Series Aleph bonds last Thursday. The downgrade would entitle bondholders holding 1.75 billion in debt to demand repayment immediately.
An additional threat was that Bank Hapoalim, Alon’s biggest bank creditor, would ask the court to put the holding company into receivership if it failed to meet a 19 million-shekel payment due at the end of this week by its Alon Retail subsidiary.
The sale to Gindi hinges on several conditions, the most important of which is that Alon Blue Square signs a bailout agreement with its creditors to Gindi’s satisfaction. Alon Blue Square faces a deadline of February 8 to get the signatures.
Under the terms of the debt agreement, reached in principle in November, repayment of 94% of Alon Blue Square’s debt, which includes 520 million shekels to banks and 380 million of Series Gimel debt, would be delayed until 2020.
But even with the conditions attached, the news was greeted positively in the stock market, where Alon Blue Square shares shot up 6.3% to close at 1.66 shekels on Sunday. Gindi’s offer for the company was 55% more than Alon Blue Square’s market capitalization before the deal was announced.
Alon Blue Square also owes Mega the final 60 million-shekel installment of a 320 million-shekel payment it promised last July as part of the Mega bailout. It also guaranteed 240 million shekels to credit insurance companies, Mega suppliers and employees. All told, that adds up to debt of 1.2 billion shekels for Gindi. In addition, Alon itself has to win approval from its creditors.
Apart from the Mega commercial space, Blue Square Real Estate’s portfolio includes the massive Tel Aviv Wholesale Market residential and commercial project. If Gindi Holdings buys Alon Blue Square it will become a partner in the project with Gindi Investments, a company controlled by another wing of the family.