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"How did NIS 17 million disappear from the joint assets line of the company's balance sheet and appear elsewhere?" the astonished owners of bonds in the Boulos Tourism company are asking themselves. The bonds, issued two years ago together with an enticing package entitled "Las Vegas on the Water," are currently trading at a junk-bond yield of 190 percent. This type of yield expresses the negligible chance that Boulos will in fact pay all its obligations to bondholders.

Troubled bondholders are now seeking more detailed answers than those being provided by Boulos's management. The bonds' trustee, Investec's trust company, has begun to take legal action against Boulos, including the filing of a petition for the appointment of a receiver for the company. Attorney Pinhas Rubin is the candidate for the position of receiver. The trustee is demanding that the court allow bondholders to seize shares and real estate that are attached to the debt. It appears, however, that even the seizing of assets will be hard pressed to cover Boulos's enormous debts, which amount to almost NIS 13 million.

Boulos has published three yearly balance sheets since mid-1999. The first, which was attached to the prospectus published in July 2000, does not include special assets and actually reflects a registered company without activities or assets. In April 2001, after raising funds via a bond issue, Boulos published its 2000 financial report. The "joint assets" column of the balance sheet included two assets with an aggregate value of NIS 16.5 million. The first is a debt belonging to the holding company, Boulos Gad (NIS 6.8 million) and the second is the debt of the company's controlling shareholder, Ibrahim Boulos (NIS 9.7 million).

The third annual balance sheet, for the 2001 fiscal year, was published in April 2002. The two debts do not appear on the assets page of the 2001 balance sheet, having been offset by net losses of NIS 8 million that were incurred by Boulos in 2002 and a NIS 7 million increase in fixed assets.

The changes in Boulos's balance of assets in the past two years raise a number of questions. One astonishing thing, for example, is the issue in 2000 of share capital for the holding company in exchange for the transfer of real estate and construction activities valued at NIS 14 million.

Another oddity concerns a loan received by the company's controlling shareholder. The debt to the tune of NIS 10 million that Boulos owes the company was repaid via the purchase of a ship. Why couldn't the company have purchased the ship directly? Why did it have to first transfer the funds to the controlling shareholder?

The balance sheet and the financial reports are signed by the Brightman accounting firm, whose association with the Boulos group ceased after the publication of the 2000 report. The 2001 balance sheet is signed by the Walid Said accounting firm of Acre.

Boulos said last Wednesday that the Boulos Gad debt was erroneously listed in the 2001 balance sheet as a debt. "In fact," says Boulos, "Boulos Tourism paid Boulos Gad for construction work. That's how the mistake was made. In the 2001 balance sheet, the mistake was corrected and the funds were not listed as an asset."

Regarding the NIS 10 million debt that Boulos owes the tourism company personally, the controlling shareholder says that he received the funds as a trustee and transferred them to the ship's owner, partially for rent, partially for payment of operating expenses and partially as installments for the purchase of the ship. He notes that it was Brightman who demanded that the funds be registered as his personal debt to the company. "There are receipts for all the installments I paid," says Boulos. "Everything is in order."

Iris Shlevin, director-general of Investec's trust company, is not satisfied with the answers provided by Boulos and Said. Shlevin said Wednesday that she didn't understand how the loans had been registered on the company's balance sheet and had then disappeared. The big question is why Boulos had to receive the money in order to buy the ship.

"If the company wants to buy a ship it should do so on its own," said Shlevin, adding that the trust company had demanded explanations from Boulos and had received different answers each time. "We never received anything in writing," she noted.

In July 2000, Boulos Tourism issued NIS 25 million worth of bonds. The issue was conducted after two months during which the Boulos Gad shares registered impressive gains on the stock exchange and options on the shares skyrocketed by about 350 percent. Boulos designated most of the funds from the bond issue for the purchase of a cruise ship that it had been renting from a Cypriot company.

The marketing efforts surrounding the bond issue rode the developing cultural wave of "the gambling Israelis," who spend most of their holiday money at duty-free stores. These efforts also included the vision of a wave of incoming tourism in 2000 that would bring handsome revenues to the Novotel hotel and a holiday complex being built in Acre.

Boulos himself helped market the bond issue by granting newspaper interviews in which he expressed his astonishment at the great interest in the ship. In one interview, he noted that the gambling turnover was twice as much as had been anticipated.

As of this writing, Boulos's cruise ship is not operating and is docked in a Greek port. The building permit for the hotel has expired and Boulos Tourism is still considering what to do with the land designated for the promising hotel, "in light of the deep recession in the [hotel] industry."

Boulos said Wednesday that there was a legal dispute over the ownership of the ship between Boulos and the company from which the ship was rented.