Elbit subsidiary Plaza Centers will withhold bond maturity payments

By Caroline Salls

Pittsburgh, Nov. 14 - Elbit Imaging Ltd. subsidiary Plaza Centers NV has not been able to complete asset disposals and alternative financing in time to allow it to make a €15 million payment due to Polish bondholders on Nov. 18 and a €17 million payment due to Israeli bondholders on Dec. 31, according to an Elbit news release.

Elbit said that Plaza today holds about €23 million of free cash balances, while an additional €10 million of cash is held as restricted cash on a consolidated basis.

Plaza's auditors have notified it that they are likely to include an emphasis of matter paragraph in their interim financial statements, referring to the liquidity situation and potential impact on Plaza's ability to operate as a going concern.

A review of Plaza's Sept. 30 financial statements is expected to be completed in the last week of November, the release said.

Possible restructuring

Elbit said that Plaza's board has decided to withhold payment on the upcoming maturities of the bonds and approach the creditors of Plaza with a restructuring plan in a formalized restructuring process within a few days.

Given the strong balance sheet of Plaza on a going-concern basis, Elbit said the restructuring plan that will be initiated by Plaza will be aimed at resolving the present liquidity situation in order to safeguard the subsidiary's continuity and preserve value for creditors.

In addition, Plaza will refrain from incurring additional material financial debts.

Plaza expects the trading of the Israeli bonds to be suspended by the Tel Aviv Stock Exchange for a limited period.

Plaza challenges

According to the release, Plaza has faced challenging market conditions for some years, primarily as a result of the underlying economic situation in many of the countries in which Plaza operates, combined with the lack of transactional liquidity in the investment markets for assets and the ongoing lack of traditional bank financing available to real estate developers and investors.

Elbit said Plaza's management team has made considerable progress in re-positioning its business model to ensure that it is focused on the deleveraging of its balance sheet and the recycling of capital, primarily through the disposal of its non-core assets.

In 2013, Elbit said Plaza has raised roughly €61 million through the disposal of five assets and the collection of the remaining proceeds from a U.S. transaction.

Additionally, Elbit said that Plaza has successfully applied intensive asset management initiatives to maximize the income generated by its portfolio of investment assets, seeing marked improvement in its turnover, footfall and occupancy levels, and has also had success in refinancing a €59.3 million loan secured against one of its largest assets, Riga Plaza in Latvia.

The company said Plaza continues to manage all its assets with a view to preparing them for sale in an improving market supported by improving operating figures.

Payment demand

According to a separate Elbit news release, Plaza has demanded full and immediate repayment of the €4.3 million paid by Plaza for rights in the Kochi Island project as a result of failure to meet conditions set in a strategic joint venture and shareholders agreement with Elbit.

The company said it disagrees with Plaza's position, but it intends to examine the implications of the exclusion of the project from the agreement before responding to demand.

Plaza Centers, a subsidiary of Tel Aviv-based Elbit Imaging Ltd., is a developer of shopping and entertainment centers in Central and Eastern Europe, India and the United States.

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