"We shall have to brandish the ax at some of our companies." (Dedi Borovich, a key figure in the Borovich group, talking with Haaretz on September 27, 2004.)

What has happened to make Dedi Borovich so keen to hack away? Since his wife Tami Mozes sold her shares in Yedioth Ahronoth seven years ago for $70 million net, he and his twin brother Izzy Borovich have been on a building spree. They've been two of the most prominent buyers and developers in Israel, not terminators.

They bought Granite Hacarmel (TASE: GRNT), parent of Sonol and Supergas, too. Then they went on to buy Maman Cargo Terminals & Handling (TASE: MMAN). Not sated yet, after the stock market crashed they bought the paints giant Tambour from Israel Discount Bank (TASE: DSCT). And for dessert they ate up the third-biggest chain of supermarkets in Israel, Clubmarket, which also gave them the keys to the New-Pharm chain.

So what has happened to the Borovich brothers to inspire this talk about selling? Their tune has consistently been conquer, overcome, buy, eat, swallow, and sometimes crush the competition. Not sell.

The official explanation is El Al (TASE: ELAL), of course. Half a year ago, the brothers took advantage of the blind spot that Israel's other tycoons had developed. They pounced where the others feared to fly and when the national airline went public, they snapped up enough shares and options to build a controlling interest.

Well, if Lev says so

At present, it seems the twins made the deal of a lifetime. Knafaim-Arkia Holdings (TASE: KNFM), the company through which they bought their El Al securities, invested NIS 200 million and in less than a year, the market value of its shares has reached NIS 500 million. That sufficed to send Knafaim stock climbing 80 percent, lifting its market value to $170 million.

Yesterday their brilliant move was ratified by one of Israel's most prominent business personalities, none other than Lev Leviev of Africa Israel (TASE: AFIL1). A year ago, the diamond magnate hesitated and finally decided to shun the El Al offering. Now he's buying 12 to 16 percent of Knafaim at its present market value, ergo, he's getting into El Al at three times the price the Borovich brothers paid.

Buying El Al seems to have been Dedi and Izzy's greatest coup, but it also created an obstacle for the twins. El Al owes the banks more than a billion dollars. The moment they control the company, that debt gets counted with their own, according to Israeli banking regulations.

In other words, in Bank of Israel argot, they become a single borrowing group that under Bank of Israel regulations owes the banks entirely too much.

If you add the debts of El Al to those of Sonol, Clubmarket, Arkia (a rival airline Knafaim owns), New-Pharm, and Tambour, you get almost NIS 10 billion. That is way above the amount the Bank of Israel says a single borrowing group can owe the banks, on the grounds that if the group implodes, the banks' stability could be undermined.

Saving face

Is that the reason the twins are sharpening their ax? To meet Bank of Israel regulations?

That is one explanation, but it is probably not the only one. There is another possibility.

Maybe Dedi and Izzy realized some time in the last year, or even before, that they'd bitten off more than they could chew. Maybe that tremendous synergy between all the companies they'd bought wasn't that tremendous after all.

In short, if they want to take off, they have to first shed that excess baggage.

And the Bank of Israel restriction on single borrowers is just the ticket. It allows the Borovich brothers, as it allowed other huge borrowers, to sell some companies without losing face. They get to sell elegantly and respectably without people pointing and laughing that they overate.

The Bank of Israel cracked down hard as the financial establishment wobbled and the banks' credit portfolios cracked. For three years the business sector has been lamenting the harsh decrees, attacking the shackles on credit for hampering economic expansion. But the time has come to wonder if the crackdown didn't actually do more good than harm - to borrowers, to the banks, and to their domination of the financial scene.

Maybe these restrictions were one of the reasons we got through the three years of recession without massive bankruptcies. Maybe they explain why, despite all those bad gambles the banks merrily financed, only a handful of major borrowers has collapsed.

The most recent example is, of course, Dankner Investment (TASE: DKNR). The Dankner family borrowed big-time in the boom and was forced to sell its flagship firm at rock-bottom prices in order to repay debt.

The buyer was Yitzhak Tshuva, but he couldn't repeat that old trick of taking on their bank debt. The single-borrower restrictions forced him to borrow the money for half the deal not from the banks but from The Israel Phoenix Assurance Company (TASE: PHOE).

We can only hope that the Bank of Israel credit caps will be joined by implementation of the Bachar recommendations, which will accelerate the development of a financial establishment outside the banks.

So the next time the economy slithers into crisis, we may worry about the companies and their workers, but not the entire banking establishment and people of Israel.