Analysis / Biggest receivership in Israel's history
The banking industry breathed a sigh of relief yesterday when the court appointed a receiver for Gad Zeevi's 19.6 percent stake in Bezeq, but the banks still have a long way to go before they get their hands on the hundreds of millions of dollars they lent him.
The banking industry breathed a sigh of relief yesterday when the court appointed a receiver for Gad Zeevi's 19.6 percent stake in Bezeq, but the banks still have a long way to go before they get their hands on the hundreds of millions of dollars they lent him. The new legal status gives the banks one advantage - they can go looking for buyers. Until now the banks were forced to communicate - unsuccessfully - with Zeevi. The latter kept making senseless proposals, which the banks kept rejecting. In effect the sale of the stock started yesterday, but the deal is nowhere near closed yet.
There has never been a deal so large that ended in receivership. In the 1980s, Koor accumulated massive debts, but then the problem was the company itself and various subsidiaries. In the case of Bezeq, there was a single loan extended for the acquisition of a good, solid corporation, and it is not the corporation that got into trouble, but the shareholder, who had put down the stock as guarantee for the financing of the deal.
Although Bezeq is a strong company, the banks complied with the instruction of the Bank of Israel's supervisor of banks and have already made provisions for doubtful debts of hundreds of millions of shekels in connection with this loan, after Bezeq's market cap dropped. The receivership may lead to further provisioning, especially if the shares continue to fall. The fact that the banks have already made most of the necessary provisions allows them more flexibility in finding a buyer. If Zeevi's loan was for $650 million and provisions have already been made for about $150 million, any offer to buy the stock for $500 million or more will enable the banks to be shot of this affair without any further provisioning.
But, in the meantime, the hands of the seven banks are still tied. They cannot act independently to sell their respective holdings. If receiver Alex Hertman manages to sell the stock, or part of it, the revenues will be divided pro rata. It may take a long time before a buyer is secured, and if one is not - the shares will be handed over to the banks, which can then decide whether to hold on to them or sell them off. "I sincerely hope we will not become owners, because this will only happen if no buyer is found," a senior banker in one of the big banks said yesterday.
Zeevi has the right to repay the loan at any given time and get the stock back. If he offers to repay most of the amount, the banks will probably make a concession, but the banks believe this to be highly unlikely. It is more reasonable that Zeevi will commission expert opinions to convince the court not to sell the stock and wait for the market to pick up. "Zeevi can shout, so the process might take years," bank sources said.
At this point the receivership does not change the status of the loan. Although the banks came one step closer to becoming owners, they are not there yet; in their balance sheets the loan is still marked as an asset. Only if they become fully-fledged owners will the banks be able to revise their records and put down the stock as negotiable securities or permanent capital.
The Zeevi affair could turn the banks into owners of one-fifth of the national telecom, which is not too detrimental. But the current blunders of other companies and those that may develop over the next year could in the near future give the banks ownership over hotels, real estate, communication companies and retail chains. If this happens, Israel's banking sector may be in jeopardy.
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