The Alon group, controlled by Shraga Biran and the kibbutzim, continues to take steps to ensure its survival, with the emphasis on rehabilitating collapsing supermarket chain Mega. Today, Alon unit Blue Square Real Estate, which owns most of the premises leased to Mega, announced a substantial discount on the rents on the properties.
Meanwhile, the Alon group's bondholders voted at the end of last week on whether to allow the group to inject NIS 50 million into Alon Blue Square, through which the group holds Mega, Blue Square Real estate, and other companies. It is believed that there is a majority among the investment institutions in favor of the move, given the sureties and the terms that the bondholders have been offered.
Blue Square Real Estate will give Mega a 9% discount on the rents on its supermarkets and its Rosh Haayin offices. The agreement will slice 4% off Blue Square Real estate's annual revenue and will lower the value of its assets. The discount is for two years starting from this month, and Blue Square Real estate's management estimates that it will mean a NIS 13 million reduction in the fair value of its assets.
The discount arrangement replaces the previous arrangement of a one-year postponement of 5% of the rent that Mega pays Blue Square Real Estate.
The alternative to rent in the form of a percentage of the turnover at each store will rise from 2% to 2.75% until the first quarter of 2019.
For 11 of the 12 Mega branches marked for closure, Mega will continue to pay full rent - for five of them until the end of the year and for the other six until February 2016 - while new tenants are sought. No arrangement has yet been reached for the twelfth branch due to close.
Separately, the controlling shareholders in the Alon group, Biran and David Wiessman, have another holding in need of external support to meet its obligations, namely real estate investment company Rosebud Real Estate Ltd. (TASE: ROSB).
The company, which has posted losses of hundreds of millions of shekels in the past few years on real estate investments in Romania and Germany, is due to make the second of three bond repayments at the end of this month, amounting to NIS 26.8 million.
Today, Rosebud announced that it had approached privately-held parent company Bielsol (80% owned by Biran and 20% by Wiessman) for clarification on whether it will continue to support the company and provide the financial assistance required to enable it to meet the bond payment.
Over the years, Biran and Wiessman have lent Rosebud a total of NIS 250 million to enable it to pay the interest and capital on its bonds, but the ongoing dispute between the two, the ouster of Wiessman from the management of the Alon group, and the current troubles of the Mega chain, put continued support of Rosebud in doubt.
Published by Globes [online], Israel business news - www.globes-online.com - on November 9, 2015
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