Alex Sapir Looks to Restructure $44M Bond in Tel Aviv [UPDATED]

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Alex Sapir is attempting to restructure his last remaining bond in Tel Aviv, in a move that could impact his properties in New York and Miami, according to documents filed by the company on the Tel Aviv Stock Exchange.

The corporate bond was issued by the Sapir Corp, a company that owns four properties in New York and Miami, including the Nomo Soho hotel at 9 Crosby Street. Sapir took the company private in June, and has one the one remaining bond series on the TASE. 

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Sapir is proposing to pay down $8 million of the $44 million bond early, and then defer the remaining principal payment for three years. Currently, the principal is due in two payments, in July 2021 and July 2022, according to the proposal filed on the TASE earlier this month. 

Sapir, who is also CEO and president of the Sapir Organization, which owns another set of properties, would contribute the $8 million himself as a loan to the company, subordinate to the bondholders.

Sapir claims the move will allow the company to weather the coronavirus crisis, which has severely impacted the hospitality industry. Sapir’s cash flow is dependent on sales at its 16-unit condo in Miami, called Arte, as well as the income from the Nomo hotel, which has been open since May at a much reduced occupancy rate, given the state of the pandemic. Sapir’s two remaining properties, development sites in Miami and New York, are both on the market, according to a report by a court-appointed trustee evaluating the restructuring. 

The trustee concluded that the restructuring was the best option for bondholders, and would be unlikely to result in a loss, while the alternative could result in a 20 to 40 percent loss for them.

But while the pandemic has impacted Sapir’s business, it was already facing financial difficulties prior to its outbreak, according to the company’s financial documents and the trustee’s report. Sapir Corporation lost $51 million in 2019 and $14 million in the first quarter of 2020, largely due to the value of its assets depreciating and financing costs, per the trustee’s report. In addition, as it stands now, the Nomo hotel has only $2 million in value over the debt against it. It is valued at $200 million, and the debt on it totals $198 million, in addition to the outstanding $44 million in bond payments, per the report. 

The hotel, which opened in 2015, has a $114.4 million senior loan from Goldman Sachs, and an $83.6 million loan from the estate of Sapir’s father Tamir Sapir, per the report. Of that, about $62.9 million is subordinate to the bondholders, which are secured by the company’s interest in the property. 

The Surfside project is in better condition in terms of loan-to-value. The newly developed condo building is valued at $207 million, with $104 million in debt, the majority of which is from entities related to the Sapir family. The company has recently begun renting its units there, as sales have slowed during the crisis, per the report. 

Bondholders will vote on the restructuring Monday, and around 70 percent expressed that they would approve the move, according to Sapir’s initial proposal. The next deadline on the bond is January 2021, when the biannual interest payment is due.

“Due to Israeli securities regulations, we cannot comment on an outstanding offer,” a spokesperson for Sapir said. 

Update: The restructuring passed on Monday, August 24, with 97 percent of the vote, per TASE files.