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Extell bondholders could force early repayment on Barnett’s bonds

Investors weigh options regarding the developer's "junk" bonds

Rendering of Extell's Central Park Tower and Gary Barnett
Rendering of Extell's Central Park Tower and Gary Barnett

Israeli investors in Gary Barnett’s Extell Development [TRDataCustom] could demand early repayment of the company’s Series A bonds, sources told The Real Deal.

About 40 private and institutional bondholders met Thursday in Israel to discuss concerns about Barnett’s ability to meet his payments on the bonds, the first of which is a $180 million payout in December 2018.

In late May, bondholders grew anxious after a first-quarter report showed flaccid results, and bond yields rose to 14 percent. The meeting was spearheaded by Kobi Segev, CEO of the Ayalim Fund, which holds about $50 million in Extell bonds.

At the meeting, Ayalim claimed that they have cause to force an immediate repayment of the bonds, in an effort to pressure Barnett to realize assets, or make some move that would guarantee the first bond payment, according to sources.

Not all investors agreed on the next move, fearing that premature action could make the situation worse.

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Extell owes close to $360 million in bonds, starting with $180 million in December 2018 and the remainder in 2019. At the close of the first quarter of 2017, Extell had $120 million on hand.

Bondholders expressed concern about the state of Extell’s business, including tepid sales at Barnett’s One57 and unrealistic pricing at Central Park Tower given the state of the luxury market. The supertall was recently approved by the Attorney General’s office with a $4 billion estimated sellout.

News that Barnett had recently signed a term sheet with a JPMorgan Chase-led group to secure a $900 million construction loan for Central Park Tower did not placate the bondholders.

In early June, bond prices fell and yields hit close to 14 percent, what some called “junk” bonds, but they have since recovered and are now trading at 10 percent. Extell has maintained the same rating since entering the market in 2014.

Ayalim declined to comment. Extell was not immediately available for comment.

(To view Extell Development’s financing transactions, click here)

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Central Park TowerExtell DevelopmentIsraeli Bond MarketReal Estate Finance