Israel's Elbit sketches out restructuring terms with major noteholders

By Marisa Wong

Madison, Wis., Feb. 27 - Elbit Imaging Ltd. said it has reached a non-binding summary of terms with two of its major noteholders regarding a proposed debt restructuring.

York Capital Management Global Advisors, LLC and Davidson Kempner Capital Management LLC are the two major noteholders. York and its affiliates hold about 20% of Elbit's outstanding notes, and Davidson Kempner and its affiliates hold about 15% of the notes.

The parties to the summary of terms believe that the restructuring is in the best interest of Elbit and its creditors in order for the company to maximize and unlock the true value of its assets, a Tuesday press release said.

Outline of restructuring

As of Feb. 26, the outstanding balance under Elbit's series 1 and series A to series G notes and its other unsecured loans is roughly NIS 2.46 billion, or about $660 million.

Under an arrangement under sections 350-351 of the Israeli Companies Law, the outstanding balance of the notes and loans would be converted into ordinary shares that would represent 86% of Elbit's total share capital on a fully diluted basis and a total of NIS 300 million (about $80 million) of new 8% notes repayable in a single payment at the end of five years.

The ordinary shares and new notes would be allocated among the various series of notes in proportion to the outstanding balance under each series and would be listed for trading on both the Tel Aviv Stock Exchange and the Nasdaq Global Select Market.

The new notes would be secured by a negative pledge and would include mandatory prepayment provisions in the event the company secures corporate-level financing and may be prepaid at any time without penalty.

According to the press release, York and Davidson Kempner are considering an offer to purchase notes from holders wishing to sell, immediately prior to the closing of the restructuring, for a total of $75 million in cash.

The exact structure, terms and conditions of the cash-out have yet to be determined.

Other terms

Elbit and the two funds are also proposing that under the restructuring the secured debt that Elbit owes to Bank Hapoalim BM would remain outstanding and payable according to the existing repayment schedule and terms.

In addition, the two funds intend to negotiate an arrangement with Mordechay Zisser, chief executive officer, executive president and a director of Elbit. As part of the restructuring, Zisser would continue as the company's CEO.

The company said it may also issue to Zisser warrants to purchase ordinary shares.

Upon closing of the restructuring, noteholders will be entitled to designate a new board of directors.

Closing is subject to approval from various authorities. In the meantime, the company has agreed in principle to enter into a customary "standstill" agreement.

Tel Aviv-based Elbit Imaging is a holding company with activities in the fields of commercial and entertainment centers, hotels, image-guided treatment, residential real estate and fashion retail.

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