Ofer family repays giant NIS 1.3 billion bank debt
Companies controlled by the Ofer family have paid back more than NIS 1.3 billion in debt to Bank Hapoalim over the past six months, heeding the banks commissioner's order limiting exposure to major borrowers.
The Ofer family companies are Hapoalim's largest single group of borrowers, with NIS 11.3 billion in loans from Hapoalim at the end of 2011. The biggest move to reduce the debt came last month when British Israel merged into Melisron. After the tie-up, NIS 644 million was paid back.
Such money was available because Melisron, which is chaired by Liora Ofer, sold NIS 760 million in bonds to the public at the end of May, when Melisron sold more bonds in its B5 series. By paying back these funds, the Ofer family lifted the restriction blocking it from borrowing more from the bank.
Also, the interest Melisron is paying the public on its bonds is significantly below what British Israel was paying Hapoalim on its loan, making the deal doubly sweet. Not only is the company off the restricted list, it's saving money.
Banks Commissioner David Zaken's order, which has been taking effect in stages over 2012, mandates that a bank's exposure to a major borrower may be no more than 25% of the bank's regulatory capital - the funds the bank must have on hand based on the capital adequacy ratio set by the regulator. Previously, that figure had been 30%.
In addition, a bank may not lend more than the equivalent of 120% of its capital to all its major borrowers together. A major borrower is defined as a company with loans equal to 10% of the bank's capital.
This is significantly stricter than the previous regulation - the equivalent of no more than 135% of a bank's capital to the country's six largest borrowers. Since the new policy kicked in, Bank Hapoalim CEO Zion Kenan has been reducing its exposure to major borrowers and diversifying its loan portfolio.
At the end of 2011, Ofer family companies had loans worth 26.7% of Hapoalim's capital.
Hapoalim received the regulator's permission to exceed the requirement, but only for two years. Yet the company worked more quickly than the regulator had demanded, and over the past six months, it has stopped lending to the Ofer group.
The Ofer family companies are considered a single borrower, even though the family argues that the heirs of Sammy Ofer have no business connection to the heirs of his brother Yuli Ofer. The bank regulator begs to differ.