Another foreign company in trouble: GFI requests to defer bond repayment

Even before the market recovered from the surprising collapse of the summer camp company, Cimed, and following several other foreign companies that failed to meet their obligations in recent years, another BVI company that issued bonds in Tel Aviv is struggling to meet its obligations to local investors.

This time it is the American real estate company GFI, which is under the control and management of American real estate developer Allen Gross, that has approached the bondholders (Series E) with a request to defer the full repayment date of its debts by three years. This led to a plunge in the bond price, which reflects "junk" yields.

Currently, the company has two outstanding series with a total volume of about 262 million shekels, of which 170 million shekels are in the mentioned bond series.

In GFI's report to the stock exchange, it is stated that there is a concern that "the company will not have the means to pay the full principal and interest payments of the bonds," whose original maturity date is at the end of the year (December 1). Therefore, it is requesting a 36-month extension on the maturity date of the bonds, so that their final payment will be updated to the end of 2029.

In exchange for the extension, the company offers to pledge its rights in the Beekman Hotel, which it owns, for the bondholders. The value of the hotel, located in Manhattan and including 287 rooms with an average occupancy of 80%, is estimated in the company's books at 310 million dollars.

In its appeal to the bondholders, the company notes that it estimates "the market environment is improving" and that during the next three years "attractive opportunities for selling hotels will be created," which will allow for the full repayment of its remaining debts to investors in Tel Aviv. In addition, it notes that the war against Iran led to an increase in inflation and a decrease in the volume of international tourism to New York, which made it difficult for it to carry out the debt refinancing it required.

Requests a 3-year deferral - and investors in Tel Aviv react with a plunge

However, it seems that at least for now, local investors are not impressed by the company's explanations. Following the report from the beginning of the week, the price of Series E bonds plummeted and is now trading at a "junk" yield of 169%, reflecting a lack of confidence in the company's ability to meet its obligations. At the same time, the yield of the bonds in the company's other series (Series F) also jumped to a level of 27%.

GFI, which operates in the commercial real estate sector in the USA, first raised debt in the local market about 12 years ago. Since then, it has raised debt in Israel in a total volume of about 1.2 billion shekels in six different series, of which it has repaid a sum of about 956 million shekels. This is not the first time for the company, as in the past the company's controlling shareholder, Gross, was required to inject funds and assets into its coffers so that it could meet its obligations.