Israeli real estate investment group Euro Globe Company has agreed to liquidate its German real estate assets as part of an out-of-court settlement with its major bondholders. The company, which is controlled by Tel-Aviv listed A. Levy Investments and Construction Ltd, breached its agreement in April this year to repay bondholders, who subsequently sued the majority shareholder in the Israeli courts.
The company was originally set up in 2006 to invest in European real estate, and currently holds five assets in Germany for which it originally paid €90m. The assets, bought between 2006 and 2008, were 70% financed by foreign banks (mainly RBS), with a further 26% financed by the issuance of bonds, and the remaining mere 4% provided by the company’s own equity. It is these bonds that the company is now unable to repay.
The nub of the bondholders claim is that Euro Globe owes them NIS 34m (about €7m) and is refusing to execute a deal in which it could liquidate its equity in its German properties, despite the fact that RBS is in the process of retreating back out of the German market, including its €26m mortgage lendings on Euro Globe assets. The bondholders have been arguing that the assets must be sold in order to protect even a fraction of their rights in the assets, and that at least €1.8m is already due on previous asset sales.
