Alfa Bank and Mirax Group have agreed on a debt restructuring, under which the lender will forgive $80 million of the developer’s obligations and still manage to come out earning an annual 120 percent on the deal.
The sides signed a comprehensive agreement that will see Mirax’s debt of about $250 million restructured for up to 18 months, Alfa Bank said in a statement Tuesday. The developer’s press service confirmed the information. Neither Alfa nor Mirax released additional terms of the agreement.
Mirax’s debt to Alfa had been slightly more than $330 million, meaning the bank wrote off about $80 million. A source at the bank confirmed those figures.
The developer should repay two loans — for $50 million and $40 million — in December 2009 and July 2010, respectively. Additionally, Alfa bought the rights to another two loans (due in February and October 2009) at a 75 percent discount from Credit Suisse in July. A source in Mirax said the developer owed $241.6 million on those loans, including interest and penalties.
Alfa Bank went to court immediately, suing the developer for $241.59 million on Aug. 4. Ten days later, the property of two Mirax Group subsidiaries — Mezhdunarodny Tsentr and Mirax City, which own the Mirax Plaza business center and the Federation Tower — was arrested.
The Mirax Group source told Vedomosti that the bank would receive half the debt in cash, while the rest will be repaid with space in the Federation Tower. Alfa Bank declined to comment on the matter, but a source close to the bank said the deal included a condition that the property be repurchased.
The deal will be exceptionally lucrative for Alfa Bank. Yegor Fyodorov, an analyst at Bank of Moscow, calculated that without taking into account interest on the restructured loan, the deal would earn Alfa an annual rate of 120 percent. Even if the property from Mirax were to become worthless, the bank would be getting an annual 28 percent, he said.
“In the next few days the arrest will be lifted from our properties,” a Mirax spokesman said. “That will allow us to resume sales.”
Nonetheless, the deal with Alfa isn’t likely to solve all of Mirax’s problems, said Mikhail Urinson, managing director of developer Alur. “[Companies] aren’t just demanding an extension of old obligations, they want new ones to finish projects they’ve started,” he said.
Lenders will have to finance the completion of construction at these sites or attract funds from elsewhere, agreed Mikhail Solovyev, director of Trust’s construction and property department.
“Alfa Bank is considering the possibility of financing the completion of one of Mirax Group’s most important projects — the high-rise Federation business center,” Vladimir Tatarchuk, an Alfa Bank deputy chief executive, said in the statement.