Israeli Bond Market Drying Up For NY Developers

David Goldsmith

All Powerful Moderator
Staff member
NYC developers face downgrades on Israeli bond market
All Year rating drops following deal delays; Extell, Moinian downgraded in June

Rating agencies in Israel are reassessing the creditworthiness of New York-based real estate developers trading on the country’s bond market, as the economic impact of coronavirus continues to unfold.
The latest company to face a ratings drop was Yoel Goldman’s All Year Management, whose four bond series all saw two-step downgrades from rating agency Midroog, according to a Sunday filing on the Tel Aviv Stock Exchange.

The firm’s unsecured Series B and D bonds were downgraded from A3 to Baa2, while its Series C and E bonds — secured by the William Vale hotel complex and phase one of the Denizen Bushwick development — went from A2 to Baa1.

According to Midroog’s report, the developer is close to violating financial covenants associated with its bonds, and its leverage is expected to remain high even after the planned sale of a roughly $300 million multifamily portfolio in the near term.

That portfolio deal encountered a hiccup last week as All Year disclosed that the buyer, David Werner, had not paid the remainder of its deposit on time. Midroog has given All Year’s bonds a negative outlook due to these developments.
A representative for All Year declined to comment.

All Year is far from the first New York City-based real estate firm to face scrutiny in these uncertain times. In late March, rating agency Maalot — an S&P Global subsidiary — downgraded Related Companies’ Israeli bonds from A+ to BBB in light of an impending maturity date. A few months later, Related received bondholder approval to restructure its debt, and the bonds were upgraded to A — still one notch below their pre-coronavirus position.

Extell Development’s bonds were also put on watch in late March, and in June Midroog officially downgraded the developer’s bonds by one level, from A3 to Baa1, with a negative outlook. The main reason for the move was the expected decline in the pace of condo sales, as well as prices, as a result of the pandemic. (Contracts for condos in Manhattan saw a nearly 38 percent year-over-year drop in August.)

Earlier in June, Midroog also downgraded Moinian Group’s bonds by two grades, from A1 to A3, with a negative outlook, citing the lack of sufficient liquidity to cover debt service requirements. The agency reiterated its negative outlook for Moinian’s bonds in a new filing last week.

Extell and Moinian did not respond to requests for comment.
These rating downgrades have led to increased interest rates on the firms’ bonds, which — combined with continued weakness of the dollar versus the shekel — has led to an increase in debt obligations.
 

David Goldsmith

All Powerful Moderator
Staff member
All Year misses Israeli bond payment, sending values plunging
Developer plagued by delays, loan defaults but claims it has money to pay

Delays in a pair of big deals and other pandemic fallout have All Year Management’s Israeli bonds in big trouble — again.
Yoel Goldman’s firm announced Sunday that it would be “temporarily halting” payments to bondholders for 30 days, including a payment on its Series B bonds that was due today. The developer is also delaying the release of its third quarter financials and has scheduled a bondholder meeting for Tuesday to discuss the situation.

“For clarification, as of the date of this report, the company has the financial resources to make the aforementioned payment,” All Year noted in a disclosure to the Tel Aviv Stock Exchange. “The board of directors has decided that at this stage, the company will continue to make payments on senior and secured loans, including secured bonds, and necessary operational expenses.”

All Year’s Series B and D bonds are unsecured corporate bonds. Its Series C bonds are secured by the William Vale hotel-and-office complex in Williamsburg, Brooklyn, and its Series E bonds are secured by the first phase of nearby Denizen Bushwick, a multifamily project on the site of the former Rheingold Brewery.
The value of all four bond series fell precipitously following the announcement, with the Series B bonds falling 42 percent from 67 to 39 cents on the dollar. All Year declined to comment.

All Year’s financial position, which even before the pandemic was facing scrutiny from investors, has been hurt by the coronavirus in several ways. Occupancy in the developer’s portfolio has dipped to 85 percent, while the weakening of the dollar against the shekel has increased its financial obligations. The company’s bonds, like those of many other New York developers, have been downgraded in recent months.

But the biggest challenge facing Goldman’s firm has been delays in the closing of two big deals that would help relieve the financial pressure significantly: the sale of a roughly $300 million multifamily portfolio to an investor group headed by David Werner, and a $650 million refinancing of the Denizen Bushwick.

In another filing, All Year disclosed that it has been missing payments on two loans since this summer, and is in negotiations with lenders to restructure those obligations, which include a $35 million preferred equity investment for a Gowanus development site on Smith Street, and a $65 million mezzanine loan on stage two of Denizen Bushwick.
 

David Goldsmith

All Powerful Moderator
Staff member
All Year fined by Israeli securities authorities, faces new scrutiny
CEO Yoel Goldman could also face 9-month suspension in connection with 2018 violations
Two years ago, Brooklyn developer All Year Management contributed to a major panic in Tel Aviv’s bond market after disclosing that $3.7 million had been “accidentally” transferred to chairman and CEO Yoel Goldman’s personal accounts.
The Israel Securities Authority has now imposed penalties on the company for violations committed at that time, according to a TASE filing and two Israeli media reports.

All Year and the ISA have reached an administrative enforcement arrangement that will see the company pay a fine of 600,000 shekels (nearly $200,000), while Goldman could be fined another 250,000 shekels and be suspended from senior positions in ISA-supervised bodies for nine months if he commits certain violations in the next 18 months, Israeli media reported. All Year also disclosed the agreement on the Tel Aviv Stock Exchange.

“Under the arrangement, the controlling shareholder [Goldman] admitted to an administrative violation of not submitting an immediate report on the transfer of funds made in favor of the controlling shareholder’s property company,” the ISA said in a statement.
All Year and Goldman also admitted to negligently including a misleading detail in the financial statements for the second and third quarters of 2018, and to misleading the ISA, according to the statement.
Israeli authorities have also indicated that they are paying attention to All Year’s more recent moves. On Sunday, the company announced that it would be temporarily suspending bond payments and delaying its third quarter financial reporting. The firm’s bond prices tumbled in response.

“I take seriously a statement that a company does not intend to comply with the provisions of the law, and delays the publication of a quarterly report to investors,” ISA chairman Anat Guetta said, noting that supervision of All Year is complicated by the fact that the company is based in the U.S., registered in the British Virgin Islands, and has no other business in Israel.

“At the same time, we are aware of what is happening in the market. Our eyes are open and we will continue to demand accountability and carry out enforcement actions as required,” Guetta said. “In this market, we make sure that only players who obey the law will operate. Anyone who does not do so will be treated with the utmost severity in order to ensure that investors’ trust in the Israeli capital market is maintained.”

In the wake of All Year’s recent disclosures, ratings agency Midrooog downgraded the company drastically, from Baa2 to C. The agency estimates that the recovery rate for All Year’s unsecured Series B and D bonds is no more than 35 percent, while the recovery rate for its secured Series C and E bonds ranges from 65 to 80 percent.

All Year did not immediately respond to a request for comment.
 
Top