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Tel Aviv, Israel - Once a Gem, Leviev's Firm Loses Sparkle

Published on: November 1, 2009 10:27 PM
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Tel Aviv, Israel - In May 2007, Israeli diamond magnate Lev Leviev was on a roll. A subsidiary of his real-estate company Africa Israel Investments Ltd. raised $1.4 billion on the London Stock Exchange. That came just a few days after a U.S. unit paid $525 million for the New York Times building in Manhattan.

But now his company is the biggest casualty among a number of large, Israeli conglomerates that borrowed heavily on Israel’s fledgling bond market. They are struggling to pay back that money—much of it owed to local pension funds and insurers.

After announcing to reporters that Africa Israel would have difficulty repaying about $2 billion in bond notes because of the real-estate crisis, Mr. Leviev has been negotiating to restructure his debts.

The company and bondholders were recently working on a package of concessions that would leave Mr. Leviev with just over 50% of the company. Mr. Leviev also would inject new cash into the company, while lenders would postpone a portion of Africa Israel’s debt, said people familiar with the matter. A Nov. 6 deadline has been set, but both sides remain at odds over valuations and other matters, which has bogged down discussions.

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Mr. Leviev and Africa Israel officials declined requests for comment. In an August news conference, Mr. Leviev said the crisis hit the company while it was on the “takeoff runway,” but predicted that real-estate markets abroad would eventually recover.

The repercussions from Africa Israel are being watched as a possible precedent-setter in Israel’s young corporate-bond market. Though the Tel Aviv Stock Exchange was established in 1953, its corporate-bond market was minuscule only a decade ago.

The market exploded only during the past few years, as the global economic boom turned to bust. Debt offerings on the market grew to 60 billion shekels, or about $16 billion, in 2007, from less than 300 million shekels in 2000. The market served as a crucial source of nonbank credit, fueling homegrown economic growth.

Those changes opened up opportunities for Mr. Leviev. After immigrating to Israel with his family from Uzbekistan in the early 1970s, Mr. Leviev, now 53 years old, started off as an entry-level diamond cutter. He rose through the ranks, eventually setting up his own business and cutting deals to access mines in Russia and Africa.

After he bought control of Africa Israel 12 years ago, he expanded the company’s core real-estate and construction business in Israel into Eastern Europe, Russia and the U.S. He bought chains of 7-Eleven convenience stores and gasoline stations in America, a Russian-language television station in Israel and an Israeli line of fashion swimwear.

In the U.S., Mr. Leviev’s company invested in properties in lower Manhattan following the attacks of Sept. 11, 2001. The company bought several luxury condo and commercial developments in and around downtown Miami in 2004.

“He was the symbol of the Israeli rush into foreign real-estate investments,” said Menachem Feder, a partner at the Tel Aviv law firm Caspi & Co.

Devoutly religious, Mr. Leviev is a Lubavitcher Hasid and is a active in Jewish charities across the former Soviet Union. Though political activists led boycotts against his businesses to protest Africa Israel’s building in West Bank settlements, he opened “Leviev” diamond retailer in the United Arab Emirates.

The Israeli tycoon lived in the crowded ultra-Orthodox city of Bnei Brak, before upgrading to a bulletproof London mansion purchased for around $60 million in 2008.

To finance deals, Mr. Leviev relied almost entirely on a mix of bank loans and debt offerings on the Tel Aviv bourse from 2005 to 2007. When global property markets started to tumble in 2007 and 2008, many of Mr. Leviev’s developments hadn’t yet been completed, robbing him of cash flow needed to pay back the debt.

Read the full article at The Wall Street Journal  


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Read Comments (10)  —  Post Yours »

1

 Nov 01, 2009 at 10:58 PM WB Says:

Let him have hatzluchas raba, botoom line things don't look 2 good for him, ereal estate is dead, he overpaid on evrything, there is just no way 2 make a dollar when u pay 2 for 1

2

 Nov 02, 2009 at 06:58 AM Anonymous Says:

Lev is actually a nice guy but when you gamble you sometimes win and sometimes lose.
I do not think Israeli taxpayer money should be used to bail him out. Remember, he was so excited about paying his share of taxes in Israel that he moved to the UK specifically mentioning taxes as the reason.

3

 Nov 02, 2009 at 01:08 AM Josh Says:

Clearly this company is treading water let's hope he's able to make it though the crisis lots of russian kirruv organizations are soley depend on him .

4

 Nov 02, 2009 at 08:04 AM Anonymous Says:

It seems to happen so soon after he moved out of isreal meshana mokim meshana mazel

5

 Nov 02, 2009 at 08:10 AM Anonymous Says:

his downfall was when he started putting his name in the paper, when he announced he was moving his permanent residence to London because Israeli taxes were too high and then he bought the most expensive home ever sold in english history - as a public figure (because of all his money) he has an added responsibility to make Israel and jews look good in the media

6

 Nov 02, 2009 at 09:52 AM dov ber Says:

Hopefully Hashem will help him out of this mess. there are people who need his help. big time.

7

 Nov 02, 2009 at 10:15 AM shmuliy Says:

Reply to #6  
dov ber Says:

Hopefully Hashem will help him out of this mess. there are people who need his help. big time.

i agree with # 6 . this man is a baal tzedaka and we should all daven for him.

8

 Nov 02, 2009 at 01:40 PM Milhouse Says:

Reply to #2  
Anonymous Says:

Lev is actually a nice guy but when you gamble you sometimes win and sometimes lose.
I do not think Israeli taxpayer money should be used to bail him out. Remember, he was so excited about paying his share of taxes in Israel that he moved to the UK specifically mentioning taxes as the reason.

Who suggested any such thing? Why do you bring it up, except to bash him?

9

 Nov 02, 2009 at 02:24 PM Handy Says:

Reply to #8  
Milhouse Says:

Who suggested any such thing? Why do you bring it up, except to bash him?

Try reading the article Milhouse. Usually you're not one of those who doesn't read English and just comments, but everyone has an off-day I guess:
If there's a bailout, or a restructuring, either way joe-shmoe Israeli taxpayers will foot the bill.

from the article:
"If it becomes clear to everyone that the public is financing Africa, there will be a domino effect and companies will demand the same accord for themselves -- all on the bent-over backs of the public," Shelly Yacimovich, a member of the Israeli parliament's finance committee, told Israel's Haaretz newspaper.

10

 Nov 02, 2009 at 02:04 PM Anonymous Says:

Reply to #5  
Anonymous Says:

his downfall was when he started putting his name in the paper, when he announced he was moving his permanent residence to London because Israeli taxes were too high and then he bought the most expensive home ever sold in english history - as a public figure (because of all his money) he has an added responsibility to make Israel and jews look good in the media

Please don't tell people how to use their own money. If a person gives tzedakah whether or not their names are in the news they are doing a mitzvah. That is all they need to do. Don't go telling them that they have to behave or anything of the sort. They are allowed to choose how to act but we CAN hope that they meake a kiddush Hashem not chas v'shalom the opposite.

11

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