An unholy triangle: banking, economic clout and the press
Never mind why Hapoalim wrote off 60% of Maariv’s debt. Why did it lend money to Maariv in the first place?
With two-thirds of Israelis abroad for Passover, the remaining one-third learned startling news last week: that Discount Investment Corporation, a member of Nochi Dankner’s IDB group, wanted to expedite its takeover of Maariv Holdings, and that Bank Hapoalim had agreed to write off most of the publishing group’s debt in order to aid the process.
Yes, Maariv. The media hailed Dankner’s rescue of the newspaper as saving jobs and Israeli democracy. If not for Dankner and his munificence, went the argument, Maariv would collapse and Israeli democracy would take a crushing blow.
Not so. First of all, Maariv might not have fallen. There were other potential buyers. Hapoalim didn’t have to give it that bizarre loan of tens of millions of shekels in April 2009, and then write off most of the sum. And what’s bad for democracy is Dankner buying the paper.
Why? Let’s start with Hapoalim’s “democratic” conduct in writing off the debt for the benefit of the new owner, Dankner. Maariv says Discount Investment is buying the loan from Hapoalim for NIS 42 million, and that it still owes NIS 106 million. The difference is money down the drain for Hapoalim, which is forgoing 60% of the loan, or NIS 64 million.
Banks forgive debt of troubled companies. But in this case, the loan to Maariv had been made two years ago. Maariv’s condition was awful at the time and it hasn’t substantially worsened since Nochi’s cousin Danny Dankner, then Hapoalim’s chairman, and Zion Kenan, then manager of the corporate banking department, approved the loan.
Maariv had been losing money for years − five of them at the time of the loan − and had heavy debts. This hasn’t changed.
Before asking why Hapoalim agreed to forgive NIS 64 million, one has to ask: Why did it lend Maariv money in the first place?
Hapoalim wouldn’t tell if asked, citing confidentiality. But it is known that Danny Dankner and Kenan had close ties to Ofer Nimrodi, then Maariv’s controlling shareholder.
In Israel nobody suffers from affiliation with a newspaper publisher, let alone when rescuing the paper. Nochi Dankner didn’t want Maariv to fall either. Nimrodi was and is his friend, and the two are partners in oil exploration through a joint company that raised more than NIS 100 million on the stock exchange, at a company value of more than NIS 900 million. The company has no assets other than an exploration license.
Bankers are tough on small clients but when it comes to tycoons and cronies, they’re there with a smile and eraser, wiping away debt.
Mind you, Nochi Dankner received the same terms Hapoalim gave to Zaki Rakib, who held the controlling interest in Maariv before him. But after Rakib took the reins at Maariv and grasped the true state of its affairs, he threatened not to comply with the agreement he’d made with Hapoalim and asked to change the terms.
Rakib’s adventure with Maariv could wind up costing him tens of millions of shekels, no small sum for owning the paper for only a few months. Maariv has been expensive for all its last three owners − Rakib, Nimrodi and Russian tycoon Vladimir Gusinsky.
Why would Dankner, who controls dozens of companies, hundreds of thousands of workers and roughly NIS 140 billion of the public’s money, want Maariv, a monster that eats up tycoons and spits them out? He’s pledged $40 million for the 59% controlling stake, but that may be just the start because Maariv is operating at a loss and will need constant infusions.
In 2010 it lost about NIS 100 million. How does one revive a print newspaper losing that much money when the whole sector is going out of fashion?
Tough one. Maybe the answer lies with a tycoon who owns dozens of public companies with gigantic advertising budgets.
New ‘democratic’ stances at Maariv
Nor does one sense democracy in the opinions one reads in Maariv these days. Even before Dankner has formally taken control, there has been a series of articles explaining that Israel doesn’t really have an overly concentrated economy, a topic dear to Dankner’s heart.
Nothing matters more to him these days than the committee on economic concentration appointed by the prime minister, which is studying how competitive Israel’s economy is. One of its two main topics is how pyramid structures (like Dankner’s IDB group) affect the economy, and what should be done about them. The other is the need to segregate financial companies from non-financial companies, which could mean IDB would need to sell Clal Insurance. This committee will affect Dankner’s affairs and status.
On Wednesday, the front page of Maariv’s business section described Dankner associate and Hapoalim chairman Yair Seroussi’s testimony to the committee. There is no economic concentration, he said, and the topic should be studied within sectors, not regarding holding companies. (Such as IDB.)
Two weeks ago Maariv ran a interview with Eli Cohen, who’d run IDB back when it belonged to the Recanati family. Asked if pyramid companies played a role in the skyrocketing executive pay, he pooh-poohed the argument, “at least as far as IDB is concerned.
Legislative intervention is a mistake.”
Nobody thinks Dankner bought Maariv for the sake of social philanthropy; he will clearly use the paper to disseminate his views. Many feel that’s his right, though the company he’s buying is a public one, in which the general public owns shares. Yet the opinions of a businessman at the top of a commercial pyramid of companies operating in uncompetitive markets, whose fortunes depend on the decisions of bureaucrats and regulators, will be the diametric opposite of those of the public and consumers.
Dankner would like to preserve economic concentration and the base of his economic clout. The public would like more competition, employment opportunities, free markets and cheaper prices. Now that he owns a newspaper, Dankner’s temptation to pressure politicians and his rivals, and regulators, will be great. That − and any sane person’s fear of confronting a man who owns that many businesses and a newspaper − are bad for democracy.