The auditors of Boymelgreen Capital Ltd. (TASE:BMGN), controlled by US developer Shaya Boymelgreen, have appended a going concern warning to the company's financial report for the third quarter of 2008. The holding company posted a net loss of NIS 90.5 million for the third quarter compared with a net loss of NIS 1.4 million for the corresponding quarter of 2008. The net loss attributable to shareholders was NIS 70.2 million in the third quarter.
The company posted a net loss of NIS 139.1 million in January-September 2008, compared with NIS 80.5 million in the corresponding period of last year. The net loss attributable to shareholders was NIS 129.3 million in January-September, compared with a net loss attributable to shareholders of NIS 59.6 million in the corresponding period.
Boymelgreen Capital had a shareholders' equity deficit of NIS 34 million at the end of September, down from NIS 92 million at the end of 2007. It had NIS 8.35 billion in total assets at the end of September, along with NIS 3.5 billion in current liabilities and NIS 4.3 billion in long-term liabilities. It had a negative cash flow of NIS 139 million.
Boymelgreen Capital owns 64% of Azorim Investment, Development and Construction Ltd. (TASE: AZRM), 25% of Azorim Tourism Ltd., and 50% of the Assuta Medical Centers compound in the Tel Aviv. Azorim owns 74% of Lagna Holdings Ltd. (TASE;LGNA), Azorim develops projects in Israel, the US, and India (through Azorim International Holdings Ltd.). Lagna, which controls the Engel Group and its subsidiaries, develops projects in Israel, Eastern Europe, and the US.
Boymelgreen Capital CEO Gil Tobul has promised that the company will seek to sell assets in order to pay its heavy debts. He added that the company also receives an annual dividend from Azorim.
However, Boymelgreen Capital's auditor warns, "Realization of the company's forecasts are not certain, and are not solely dependent upon the company, but on additional factors. Consequently, the forecasts may not be achieved in whole or in part."
Boymelgreen Capital has no substantial income from current operations, so its ability to pay its debt essentially depends on the dividends it receives, as well as from management fees, the sale of holdings, and owners' loans.
Boymelgreen Capital predicts that it will have a negative cash flow of NIS 133 million in 2010. Although Azorim's share has fallen 85% since the beginning of 2008 to give a market cap of NIS 380 million, Boymelgreen Capital has not made a write-down on the holding, which is its primary holding. In 2006, Boymelgreen Capital acquired control of Azorim at a market cap of NIS 1.95 billion.
Investors in Boymelgreen Capital are worried that the company could become insolvent. Its share has fallen 85% since January and its current market cap is NIS 65 million. The share was unchanged at NIS 13.87 by midday today. Boymelgreen Capital's Series A bond is traded at junk bond yield of 114%, and its Series B bond is traded at junk bond yield of 103%.
Published by Globes [online], Israel business news - www.globes-online.com - on December 1, 2008
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