Bond Holders Want Leviev to Put up Money or Relinquish Control of Company

Israeli diamond giant Lev Leviev is finding that the financial woes of his Africa-Israel conglomerate may affect his diamond accumulated riches. After the company announced it may not be able to meet financial obligations, it offered to convert a $1.2 billion debt into shares worth just $586 million. The offer angered financial institutions, which demanded that Leviev either relinquish control of the company or bring money “from home.”

Africa-Israel Group, controlled by Leviev, started negotiating with banks and bond owners over restructuring debts the group generated following the world economic downturn. In August, the company reported quarterly losses of $380 million.

Leviev said the company had sold assets worth more than $1 billion and that he had personally put over NIS 1 billion ($262 million). However, that may not be enough. According to Africa-Israel CEO, Izzy Cohen, the company may have problems maintaining its payment schedule starting in 2011 onwards.

Bond holders said the company’s offer is good for one person only - Leviev. According to the offer, about half of Africa-Israel’s debt to bond holders will be erased. The unhappy response included calls to dismantle the company and sell its assets.

One financial executive said that dismantling is not necessarily the best solution, but added that if Leviev wants to keep a controlling interest in the company, he will need to funnel into it cash from his own pockets, and not expect only investors to pay the price.