Alon Blue Square arrangement condition calls for share nullification

By Caroline Salls

Pittsburgh, May 25 – Alon Blue Square Israel Ltd. filed a revised motion with the District Court of Lod, Israel, to hold a meeting of its bank debt, guaranteed bank debt and series C debenture holders and various guaranteed creditors for approval of a proposed debt reorganization and arrangement, according to a company news release.

The company said the revised motion was filed following the court’s decision to approve the Mega Retail trustees’ signing of an agreement with a subsidiary of Bitan Wines Ltd. for the acquisition of Mega Retail and convene meetings of creditors of Mega Retail to discuss and vote on the proposed sale agreement and debt arrangement with Mega Retail.

Arrangement terms

Along with the arrangement, a company under the control of Moti Ben Moshe would acquire from controlling shareholder Alon Israel Oil Co. Ltd. all of the outstanding shares of Alon Blue Square, which represents 72.21% of the company’s shares, the rights and obligations of Alon Israel to an NIS 110 million bridge loan extended to Alon Blue Square and the rights and obligations of Alon Israel in another NIS 60 million loan subordinated to financial debt in exchange for payment of NIS 115 million.

Alon Blue Square said Ben Moshe has requested that the arrangement be contingent upon receipt of an order by court stating that at closing all of the outstanding share capital and all rights to the receipt or issuance of shares of the company will either be transferred to Ben Moshe, for no consideration, from the existing shareholders or be erased and nullified, for no consideration to the existing shareholders.

Following closing of the arrangement, Ben Moshe would be the sole shareholder of Alon Blue Square, and effective upon closing, the company will no longer be a publicly traded company.

With regard to the nullification of the company’s shares for no consideration, Alon Blue Square said it is highly likely that any alternative to the arrangement will leave its shareholders with no economic value taking into account the company’s cash flow position and the value of its assets in a dissolution versus the amount of debt.

During the short time that the company has considered this condition set by Ben Moshe, Alon Blue Square said it has not reached a conclusion on this issue. The company said it will continue to examine the matter.

In addition to Ben Moshe’s condition, the company said the arrangement is no longer contingent on reaching a parallel arrangement of creditors of Mega Retail concurrently with the acquisition of Mega Retail by Ben Moshe or the company or the arrangement of the relationship between the company and Mega Retail.

In lieu of an NIS 300 million deposit, which was intended to secure early debt repayment, the company said NIS 100 million will be designated for early debt repayment of the financial debt and guaranteed debt to occur within six months of the closing date.

Also under the arrangement, payments to guaranteed creditors, including banks, will now be deposited in a designated account that will accrue interest at the rate charged by the relevant bank plus 1%. Payments would be transferred to the guaranteed creditors upon the earlier of distribution of all liquidation proceeds of Mega Retail and 12 months from the date of closing. If any guaranteed creditor receives liquidation proceeds of Mega Retail within 12 months of closing, a portion of those proceeds that relates to debt secured by guarantees or indemnification undertakings made is to be returned to the company.

Cash infusion

As part of the arrangement, Alon Blue Square said Ben Moshe would commit to make cash infusions of up to NIS 900 million, of which up to NIS 200 million can be designated to settle mutual claims between the company and the trustees for Mega Retail or acquire Mega Retail, at the discretion of the company.

The closing of the arrangement is contingent upon approval of the financial creditors and guaranteed creditors, approval of the Israeli court, receipt of agreed upon third-party approvals for completing a change of control in the company and the transfer of the acquired assets free and clear of any liens. The deadline for satisfying the closing conditions is July 31.

Grace period sought

Alon Blue Square said it has asked the court to grant it a grace period so it will not be required to make any payments until closing other than ongoing payments and payments essential for the continued operation of the company as a going concern.

Based in Rosh Ha’Ayin, Israel, Alon Blue Square owns and operates supermarkets and specialty stores.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.