Meitav Investment House is taking its battle against Ampal-American Israel Corporation controlling shareholder Yossi Maiman and the board of directors public.
Earlier this week Yaniv Zalel, Meitav provident fund investment manager, quit the team representing holders of Ampal's Series Bet (B2) bond series after finding himself at odds with its other members.
"When companies get into trouble for exogenous reasons we rise to the challenge and help them out," explained Meitav CEO Ilan Raviv. "But this isn't true of Ampal, which for years has let loose with insider deals and disproportionate salaries. We aren't prepared to lend a hand to this and we demand a greater contribution from Maiman."
Why did Meitav resign from the representation team and decide to fight independently?
"We still prefer to fight, and now, from outside the team, our degree of freedom is greater," Raviv said. "Our members don't put their savings in our hands expecting us to run and hide when the bonds are trading at 17 agorot. Investment managers don't merely need to sit in their offices and manage investments, but to also get out of the box and fight when necessary, and Ampal is one of those cases that demands a battle.
"What mainly bothers us is the behavior of the Ampal directors who did everything to serve Maiman's interests.
"Otherwise it is impossible to explain how in November 2011, after the gas flow from Egypt was already known to be in trouble and Ampal's bonds were trading at yields to maturity of 50% to 60%, the directors approved a $22 million loan to [Maiman's] privately-held Merhav Group for developing its ethanol project in Colombia. And now he proposes to return the loan? This isn't enough. Salaries are also disproportionate and need to be cut back significantly."
Is Meitav demanding that Maiman sell his yacht and private jet?
"We don't possess his financial statements, and don't know what's mortgaged and what isn't. What is clear, though, is that the settlement is unfair and that Maiman needs to pony up more," Raviv said.
Ampal's fortunes rested largely on its 12.5% in Egyptian natural gas supplier East Mediterranean Gas and its pipeline to Israel. But the venture literally blew up last year following the Egyptian revolution and the endless repeated sabotage to the pipeline that ensued.
Meitav holds about NIS 37 million par value in Ampal bonds with a total market value of between NIS 7 million and NIS 8 million, second only to Clal Insurance Enterprises Holdings with NIS 110 million par value. "We didn't buy the Ampal bonds when they were originally issued, and didn't invest in EMG because we were clear about the risk factors," Raviv added.
Negotiations toward a settlement between Ampal and holders of its three bond series, owed a total of NIS 850 million by the company, have been continuing for seven months.
Ampal wants a two-year deferral in repayment in exchange for about 1% in interest and 23% of its stock. Ampal is crossing its fingers that, in the interim, gas will resume flowing from Egypt to Israel - an unlikely scenario at present - or that its suit against the Egyptian government for the disruption in the supply of natural gas will succeed and provide the company with compensation.
Meitav left the bondholders' negotiating team due to two points of contention. The first was Ampal's demand that nobody be subject to personal lawsuits. Most bondholders agreed to this, but at a price.
The price Ampal agreed to was an additional $9 million cash injection, not from Maiman but from other proceeds of the company, probably from the sale of assets, an arrangement that does not satisfy Meitav.
The second concerned the $22 million loan to Merhav for the ethanol project, which can be converted into 25% of the project's stock. But financing for the project still hasn't even been closed and after several years nothing has been accomplished beyond purchasing the land.
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