Aya New York Wins Approval to Exit Israeli Market Early

Bondholders have approved Aya New York’s plan to exit the Israeli capital markets, clearing the way for Amir Shriki’s Manhattan real estate company to refinance its debt with a United States-based bank.

Bondholders voted 99.6 percent in favor of the buyout, according to a letter from the trustee. The company will repay the bonds at 100 percent of par value about two and a half years before their scheduled maturity and without a prepayment penalty, Shriki said.

Aya plans to use a roughly $104 million bank loan to pay the bondholders, with JLL Capital Markets arranging the financing, Shriki said, adding that the new debt will carry an interest rate of about 6 percent, compared with the 7.7 percent rate on Aya’s Israeli bonds.

The move marks a reversal for Shriki, who entered the Tel Aviv Stock Exchange’s bond market in February with bigger ambitions. Aya raised about 292 million shekels, or roughly $96 million, through a newly-formed British Virgin Islands entity, with plans to use the bond series as a springboard for future bond offerings and additional acquisitions.

Instead, Shriki said he quickly concluded that the strategy would not work.

“The sentiment in the Israeli bond market for American companies, in my opinion, does not allow growth for the next year or two,” Shriki told The Real Deal.

The company’s British Virgin Islands-based structure — a strategy commonly used by American real estate companies raising money in Israel — became a more difficult sell to investors following a string of problems involving companies that had issued Israeli bonds, he said. Shriki pointed to the collapse of Simad Holdings and troubles involving other American real estate operators as contributing to heightened scrutiny.

“There’s a kind of discrimination here against BVI companies,” Shriki said, while acknowledging investors’ concerns in the wake of Simad Holdings and GFI Capital’s troubles on the bond market.

American summer camp empire Simad Holdings filed for bankruptcy this summer after the owners, David and Michael Shabsels, defaulted on $214 million in Israeli bond payments and transferred $34 million to themselves. Simad was based in the British Virgin Islands.

In another example last month, Mike Kohan was removed as CEO and president and forced off the board of directors of Kohan Properties, another BVI-based entity listed on TASE, after the discovery of an allegedly unauthorized $4.5 million loan on five Manhattan office properties and an additional $7.4 million in personal withdrawals.

Aya’s bond was secured by two Manhattan multifamily properties: the 151-unit Renoir House at 225 East 63rd Street and Riverside, a pair of Upper West Side buildings with 82 units at 120 and 125 Riverside Drive.

The company, which specializes in buying value-add distressed assets, initially hoped the Israeli capital would help finance future acquisitions. But a rocky series of events followed the rollout. In July, the company’s second-quarter financial statements revealed that some subsidiaries had entered into agreements with merchant cash advance companies, selling future receivables at properties that were already pledged to bondholders.

Shriki said he was unaware of the liens on pledged assets and resolved the problem within 48 hours of finding out about them. Still, holders of roughly 45 percent of the bonds appointed attorneys to represent them and alleged violations. Now Aya will avoid such scrutiny by returning to bank financing.

“We came for growth, not to save on interest rates, etc.,” Shriki said. “Since we don’t see that happening, we’re doing this move, and I’m happy.”