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The Decline and Fall of Lev Levayev’s Africa-Israel

Africa-Israel investments, controlled by Russian-born billionaire Lev Levayev, may not be able to continue as a “going concern.”
By Tzvi Ben Gedalyahu
First Publish: 11/29/2009, 11:54 PM / Last Update: 11/30/2009, 12:09 AM

Israel news photo

African-Israel Investments, controlled by Russian-born billionaire Lev Levayev, announced Sunday it may not be able to continue as a “going concern.” The company rocked Israel’s sound financial structure several weeks ago with reports of huge losses and difficulties in meeting its debt obligations.

The aftershocks have affected the earnings of Bank HaPoalim, which has reported a 3.6 percent drop in earnings compared with the previous year. Most of the additional money it set side for doubtful debts was related to loans to Africa-Israel.

African-Israel defaulted on a series of bonds earlier this month. "Since... there is uncertainty surrounding a deal to restructure the debt and its approval by the court significant doubts exist that the company can continue as a going concern," Africa Israel said in a statement Sunday.

The company reported a quarterly loss far less than the half a billion dollar loss in the same period a year ago but still enough  prevent its ability to finance expenses for debt. In addition, its paper value of investments has fallen.

Representatives of holders of one series of bonds insisted Sunday that African-Israel can meet all of its liabilities. The bonds were to be repaid two weeks ago, but the company was able to pay only the interest and not the principal.

Meanwhile, a major holder of Africa-Israel bonds who sold his holdings at a loss is organizing a class-action lawsuit amounting to tens of millions of dollars against the company and Levayev for alleged false reporting of company results.