Leviev to Put Up $200 Million to Save Company

Leviev will see his stake in Africa-Israel drop to 52% from 75%

Israeli diamond tycoon Lev Leviev agreed to put NIS 750 million ($200 million) into conglomerate Africa-Israel and will keep a 52.8 percent controlling stake in the firm, according to an agreement reached on Friday.

Leviev was under pressure by bondholders to infuse money, convert bonds and relinquish his controlling stake in the firm. Industry insiders believe Leviev will need to borrow from his diamond firms to be able to put up the money.

The 11-hour meeting between Africa-Israel executives and the financial institutions concluded at 4 am Friday morning.

According to the agreement, Africa-Israel will issue stock privately or in a rights issue in which Leviev will invest the NIS 750 million over four years; bondholders will receive shares of Africa-Israel and some of its subsidiaries in return for forgoing part of the debt; Africa-Israel will issue new long- and short-term bonds. Finally, bondholders will receive an immediate cash payment for part of the debt.

Leviev’s current 75 percent holding will be diluted to 47.24 percent, which will then rise up to 52.8 percent as he puts up the money for new shares.

The deal still needs to receive the approval of the banks, regulators, Africa-Israel shareholders, bondholders and the court.

The company reached a deal with U.S. banks to refinance its largest American investment, the old New York Times building. This will improve Africa-Israel's equity position by $400 million.

At the end of the entire restructuring process, Africa-Israel will be left with only $1.17 billion in debt, down from $2 billion, and $1.3 billion in owner’s equity.

In April, Africa-Israel started selling assets to ensure that it has the cash to pay bonds. In August, Leviev said the company had sold assets worth more than NIS 4 billion ($1.04 billion) and that he had personally put up over NIS 1 billion ($262 million).

Africa-Israel CEO Izzy Cohen revealed the company may have problems maintaining its payment schedule starting in 2011 onwards. 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.”