Alon Blue unit Mega Retail wins court approval for plan of recovery

By Caroline Salls

Pittsburgh, July 15 – Alon Blue Square Israel Ltd. subsidiary Mega Retail’s plan of recovery and arrangement was approved by the District Court in Lod, Israel, according to a 6-K filed Wednesday with the Securities and Exchange Commission.

The plan is still subject to approval of Alon Blue’s board of directors, as well as the board of directors of controlling shareholder Alon Israel Oil Co. Ltd.

Under the plan, Alon Blue will increase its commitment to provide additional funding to support Mega Retail, with the funding to increase to NIS 320 million from NIS 240 million. Half of this amount will be provided as equity and half as a loan to be repaid from Mega Retail’s profits following repayment by Mega Retail of its loans to its bank lenders and suppliers.

In addition, the roughly NIS 275 million owed to bank lenders by Mega Retail, which is guaranteed by Alon Blue, is to be addressed directly between Alon Blue and the lenders.

Amounts paid to the lenders by Alon Blue as a result of its guarantees are repayable to Alon Blue by Mega Retail on the same terms as the repayment of loans to the bank lenders, but only when the amount of Mega’s debt to Bank Hapoalim not guaranteed by Alon Blue does not exceed NIS 80 million and the debt to the bank lenders guaranteed by Alon Blue is paid in full.

Plan terms

The plan of arrangement also contains the following elements:

• The principal owed to bank lenders will be paid quarterly over a period of six years after a grace period of three years following the approval of a plan of recovery;

• Interest at an annual rate of 3% linked to CPI will be paid quarterly from the approval of the plan of recovery;

• As long as guaranteed debt is not paid, Alon Blue has made commitments to the lenders.

Specifically, Alon Blue said it will not distribute a dividend to its shareholders before the end of 2018, and afterwards it may pay dividends only if following the distribution it will have minimum shareholders’ equity of at least NIS 200 million and, after publication of Alon Blue’s 2016 financial statements, the net asset value of its assets will be calculated on an economic basis. If the net asset value of its assets minus obligations will be less than NIS 100 million, Alon Blue will provide to the lenders an additional basis to cause the guaranteed debt to be immediately repayable;

• Payments to Mega Retail real estate lessors will be paid monthly rather than quarterly;

• Blue Square Real Estate will grant a 5% deferral for one year in lease payments due to it, subject to approval of its shareholders and other relevant corporate bodies of Blue Square Real Estate;

• Specified transactions between Mega Retail and its related parties would be subject to the special approvals and inspections, including inspections by directors nominated by employees or independent directors;

• Alon Blue will conduct a rights offering in order to raise from its shareholders at least NIS 150 million, of which Alon Israel would commit to invest its NIS 110 million share;

• 30% of the existing debt to large suppliers and service providers will be deferred for two years until June 30, 2017, with the deferred amounts repayable thereafter in 36 equal monthly installments with 3% annual interest. The balance of payments due to suppliers would be paid in four equal weekly installments beginning July 31, 2015 or, if later, the original payment date in the case of large suppliers and service providers;

• Large suppliers and service providers of Mega Retail would be able to convert the deferred debt owed to them into ordinary shares of Alon Blue during a period of five months, beginning seven days from the closing of a rights offering by Alon Blue to its shareholders. During the first two months, the large suppliers would be able to convert their deferred debt into ordinary shares at the price per share in Alon Blue’s rights offering to its shareholders. During the remaining three months, the conversion price would be the higher of 120% of the price per share in the rights offering to shareholders and the average closing price of Alon Blue’s shares during the 30 trading days before conversion;

• For a period of two years, all suppliers will not change the credit periods for repayment of accounts payable from those that existed before June 30; and

• The repayment of the existing debt to small suppliers and service providers will be paid in four equal weekly payments starting July 31, or the original payment date, if later.

Alon lender agreement

In addition, Alon Blue and the lenders have agreed on terms of renewal of existing on-call loans. Under this agreement, Alon Blue would only be required to make payments to the lenders during the coming six months.

Alon Blue said this agreement by the lenders is subject to no other creditors either accelerating their debt for immediate payment or not renewing their on-call loans to Alon Blue and is not binding on one bank that holds on-call loans of Alon Blue, but is not a Mega Retail lender, or on debenture holders.

As part of the plan, Mega Retail’s board of directors would be comprised of seven members, including three appointed by Alon Blue, two appointed by employees, one appointed by Mega Retail from five candidates recommended by the chairperson of the Economic Organizations in Israel and one external director appointed by the court.

Stay extended

Alon Blue also announced today that the District Court in Lod, Israel, approved a 30-day extension for a stay of proceedings for 51% indirect subsidiary Eden Briut Teva Market Ltd.

Alon Blue said the trustee appointed was authorized to take steps to sell the operations or the shares of Eden.

Also, Alon Blue said the trustee for its series C debentures will hold a bondholders’ meeting on July 23.

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

© 2015 Prospect News.
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