MirLand presents debt restructuring arrangement terms, eyes meetings

By Caroline Salls

Pittsburgh, July 7 – MirLand Development Corp. plc applied to the Cypriot Court to sanction the scheduling of bondholder and shareholder meetings to approve the company’s debt restructuring arrangement, according to a Tuesday news release.

The key terms of the proposed arrangement include the following:

• Principal payments are postponed until July 30, 2018. When the arrangement takes effect, the interest payments due for all series of bonds in 2015, together with interest payments of series A and series B bonds deferred from 2014, will be paid in full;

• Interest on series A through series F bonds will increase by 1¼% to the current base interest of each bond series with this additional interest being added to the principal and paid off with the principal payments when the arrangement takes effect;

• Interest payments for series A through series F bonds will be paid in 2016 and 2017 on the same day each year and, beginning in 2018, on two fixed dates on the same days each year. All future interest payments will be paid in full, although 50% of payments due in 2016 may be deferred at the option of the company. In this case, from Dec. 31 2016 until fully paid, the deferred interest payments will bear an interest of 2½%;

• If the company exercises its right to defer interest payments, majority shareholders Darban Investments Ltd., Jerusalem Economy Ltd. and Industrial Buildings Corp. Ltd. will provide either an exercise of share options or a loan equal to $15 million, less any amounts subscribed for under the exercise of options together with any amounts subscribed for under an open offer;

• The majority shareholders will participate in an issue of $12.89 million of new shares in which all other shareholders of the company will have the opportunity to participate by means of an open offer. Of this issue amount, $6.1 million will be subscribed for shortly after the arrangement becomes effective and the rest by no later than June 30, 2016. If either issue is not fully subscribed for by the majority shareholders, they are required to exercise some of their options or provide a dollar bearing loan to the company to the extent that other shareholders do not take up their entitlements under the open offer;

• If the majority shareholders do not comply with the subscription provision, they will be required to transfer a controlling equity interest in the company to the bondholders, which will be placed with an escrow agent;

• Bondholders will receive 5½% of the company’s existing issued share capital together with options for 12% of the issued share capital at an exercise price discounted to the prevailing market price;

• Type A options will also be granted to the majority shareholders in a number that would enable them, in the event that no options other than type A are exercised, to hold a maximum of 84% of the issued share capital of the company, which is their existing interest;

• All bond payments related to the bonds held by the majority shareholders will not be paid until June 2019. The majority shareholders will also be restricted from selling their bonds until June 30, 2019. These restrictions will not, however, apply to several entities included in the majority shareholders if Eliezer Fishman is no longer a direct or indirect majority shareholder;

• Upon the completion of the arrangement, officers, directors, employees and the majority shareholders and their consultants will receive full waiver from any claims by bondholders, excluding any criminal, fraudulent or malicious actions;

• Completion of the arrangement is subject to approval of MirLand’s shareholders, the Tel Aviv Stock Exchange and Israel Securities Authority, the bondholders and the court, as well as to the receipt of a ruling from the Israel Tax Authority and execution of a new trust deed with the bond trustees;

• MirLand will be entitled to repay bonds before the maturity date without penalty until July 31, 2019; and

• Restrictions on payments of dividends, the purchase and disposal of assets, the business of the company and related party transactions, along with financial covenants, will be placed on the company, and MirLand will provide a negative pledge to the bondholders by way of security. The bondholders will also have the power to appoint a director.

Proposed amendment

In addition to the terms of arrangement provided to the court, MirLand said it has agreed with the bondholders to an amendment to the arrangement.

Under the proposed amendment, at the earlier of either three months from the increase in the debt rating of Jerusalem Economy Ltd. to a rating of A or higher or upon each of Aug. 1, 2016 and Dec. 31, 2016, the majority shareholders will either exercise options allocated to them under the arrangement for consideration of at least $5 million or cause the company to issue an additional 5% of shares to bondholders for no consideration.

The company said the majority shareholders will be expected to make a cumulative capital injection of up to $10 million or issuance of up to 10% of MirLand’s share capital.

The terms of the amendment also require the admission of the entire issued and to-be-issued share capital to trading on the Tel Aviv Stock Exchange. The shares will continue to be admitted to trading on the AIM, the release said.

MirLand is a Cyprus-based real estate developer that primarily functions in Russia but also has subsidiaries in Israel and Hungary.

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