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