Africa-Israel Shares, Bonds Soar on Leviev Debt Rescue Plan

  • Billionaire shareholder set to buy loss-making Russian unit
  • Company’s debt-to-equity ratio has jumped to six-year high

Africa-Israel Investments Ltd.’s shares and bonds soared as its controlling shareholder, billionaire Lev Leviev, conducted talks to buy the real estate company’s Russian unit, aiming to help restructure about 3 billion shekels ($777 million) in debt.

The company’s stock rose 7.2 percent to 1.162 shekels, its highest close since June 20, on Monday in Tel Aviv. It has declined 36 percent this year, compared with a 4.6 percent drop in the benchmark TA-25 index. The yield on the company’s 7.5 percent bond maturing May 2025 closed at its lowest level since Dec. 10.

Leviev is in talks with trustees and representatives of Africa-Israel’s bondholders on a debt settlement that would include buying the company’s 65 percent stake in its loss-making Russian unit AFI Development Plc, Africa-Israel said in a statement to the Tel Aviv bourse. About 85 percent of the stake is collateralized to bondholders, according to the statement.

“This is a nice move in the right direction, as the money from the sale will probably pay part of the parent company’s debt owed to its bondholders and reduce leverage,” Adi Babani, a trader at Bank of Jerusalem, said by phone from Tel Aviv. “For Leviev, this looks like a good opportunity to buy AFI at attractive conditions.”

Africa-Israel’s debt-to-equity ratio has soared to over 300 percent since late last year, its highest level since 2010, after its AFI unit suffered losses during a recession in Russia. AFI’s shares have dropped 82 percent in the past two years. In 2010, Leviev agreed with bondholders to restructure 7.5 billion shekels in debt.

(An earlier version of this story was corrected to show Adi Babani’s proper title in fourth.)

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