(photo credit: Bloomberg)
It’s hard to believe, but the Israeli government is joining the wave of debt
arrangements by companies that have issued bonds to the public.
which is controlled by the state, is proposing a 35 percent “haircut” to its
bondholders, people familiar with the matter told Globes.
Globes revealed that Agrexco intended to turn to a debt arrangement because of
heavy losses it incurred last year and a going concern warning that its auditors
appended to its financial statements.
The agricultural export company
owes 32 million euros to institutions to which it issued bonds in 2007. It is
now proposing to them to convert 35% of the debt to 10% of its equity and the
rest to reschedule over a long period. In return, the state will inject capital
into the company and make a partial payment in cash.
Agrexco had revenue
of some 490 million euros in 2010, but posted a net loss of 33 million euros.
The company attributed the losses to a loss of market share in Europe, the
weakness of the euro and climatic events in Israel.
Agrexco has a deficit
of 13 million euros on shareholders’ equity and 49 million euros of working
capital deficit. It financial liabilities stand at 83 million euros, and it has
failed to meet financial covenants in its bond-trust deed.
Apart from the
debt to bondholders, Agrexco has debts to banks and suppliers in Israel and a
large debt to a French bank.
Globes has learned that the company owes
about 60 million euros to the Ofer family, under a deal to lease two
refrigeration vessels from Ofer Shipping. The ships were designed, ordered and
built by and for Agrexco with finance from a German bank with no connection to
After two years of operating the ships, the company
approached Ofer Shipping with a request that Ofer should buy the ships and
operate them for it, as it was dissatisfied with the way the ships had been
operated by a foreign company.
Ofer Shipping came to Agrexco’s aid and
bought the ships, leasing them to Agrexco for 14 years, which will end in
December 2019. The money paid by Agrexco to Ofer Shipping mostly serves to repay
the loan from the German bank, with the rest covering operating
When Agrexco was founded in 1953 it received a government
monopoly on the export of fresh agricultural produce, apart from citrus fruits,
and its success was assured. However, over the years, agricultural exports have
been opened to competition, and now Agrexco accounts for only 50%.
state plans to privatize the company. At the end of 2010, it injected NIS 55
million into Agrexco, after the company failed to meet shareholders’ equity