Continental may write off NIS 100 million to Peled-Givony
Continental Bank, the main creditor embroiled in the crumbling Peled-Givony group, may end up writing off half the credit it extended, financial sources say. This would amount to NIS 90-100 million, a severe problem for the bank since the total NIS 190 million credit it gave the group was 75 percent of its equity.
Continental, jointly owned by Bank Hapoalim (63 percent) and the Sweden-European Bank SEB (37 percent), made provisions for doubtful debts on only a small part of its credit to the Peled-Givony group in the two preceding quarters, but is expected to announce a much larger provision for the second quarter of 2002, causing the bank to report heavy losses for the quarter. This will not however push the bank's capital ratio below the minimum 9 percent central bank requirement, since Continental had a high capital ratio of 13.5 percent at the end of the first quarter.
Continental Bank extended credit to several firms in the Peled-Givony group and personal loans to the group's financial advisor. Bank Hapoalim's review of Continental's actions notes the failure of Continental to recognize the interdependence of the parties.
Ha'aretz has learned that credit officers at Continental drew the management's attention to the links between the parties the bank was lending to, but it clearly ignored the warning. Two companies in the Peled-Givony group, Feuchtwanger Industries and Mashav Refrigeration, were awarded 24 days protection from creditors on Wednesday. The group collapsed because the controlling shareholders used the assets of the firms in the group to finance the acquisition of other companies in a criss-cross fashion.