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Three weeks after the Kotick family sold its controlling stake in Cementcal to a group of foreign investors headed by Moshe Shemesh, the economic woes of one of the largest infrastructure companies in Israel are surfacing in all their fury. The board of directors has resigned and a new board that can lead the company on the path to recovery has not yet been appointed. It also turns out that Cementcal doesn't have the NIS 15 million it needs to pay its bondholders today.

"We have still not consolidated the financing sources for the upcoming payment of the partial redemption of the bonds," Cementcal announced last week. As soon as the official announcement of the company's inability to pay reached investors' ears, the price of the bonds on the stock market plummeted by tens of percentage points, and they are now being traded at an annual yield of 40 percent.

The trust company of the United Mizrahi Bank, which is the trustee for the bonds, ordered Cementcal to call a special meeting of the bondholders at which it would request a 60-day postponement of the payment. Cementcal's management will also give bondholders a financial report on the company, which owes them about NIS 87 million. The general meeting has been called for mid-April, so bondholders will have to wait until then anyway before receiving any payment.

Cementcal is involved in many commercial and residential construction projects, as well as infrastructure projects, including Ben-Gurion Airport 2000 and the Trans-Israel Highway. The company, which has a payroll of about 250 Israelis and some 700 foreign workers, as well as dozens of subcontractors, has had revenues of over a billion shekels in the past three years.

Cementcal is now trading at a very low market value of NIS 10 million, after going public in 1997 at a market value of close to NIS 250 million.

About three weeks ago Binyamin and Ruth Kotick sold the controlling stake in Cementcal for $600,000. The new shareholders include Shemesh (20 percent), Rio Car Distributors (4.99 percent), Cosmos Building Systems (4.99 percent), attorney Michael Talmor, who will serve as trustee (15 percent) and Cementcal's CEO, Moshe Frizinsky (7.7 percent).

Joint general manager Yossi Cohen said Monday that the new shareholders are formulating a work plan that will include continued involvement in residential and infrastructure projects in order to get the company back on its feet and improve cash flow. Cohen noted that toward the end of March, the board of directors is due to meet to approve the annual report for 2001, and at that time a new board will apparently be appointed, with the inclusion of the new shareholders.

Cohen explained that one of the problems facing Cementcal is the failure of contractors to pay for work that has been done for them, due to financing problems in the real estate industry. The Kahtan group, for example, owes Cementcal some NIS 8 million for work that has been completed, the Dan Center owes NIS 14 million and there are other debts that Cementcal is unable to collect.

In December 2001, Cementcal sold the parking lot of the auditorium in Merkaz Hacarmel in Haifa to Ram Parking Lots, to improve cash flow. The sale was a two-stage deal, with the first stage being the transfer of 440 parking spots in exchange for $6.7 million. In the second stage, 100 more spots will be sold for $1.5 million, but that is conditional on expansion plans by the city.

Cementcal has announced that it is in the advanced stages of negotiating the sale of a restaurant, cafe and other stores in the auditorium project, which should be finished by June 2002.

Cementcal's other activities include an equal partnership with Solel Boneh in a company that will do foundation work. The new company bought 50 percent of the equipment it needs from Cementcal, for NIS 12 million. Of this, NIS 7.5 million will be in cash and the remainder in three semi-annual payments that are conditional on the partnership's profits.

Cohen says that Cementcal is very active and is applying for many residential, office and infrastructure project tenders. The company is currently involved in a NIS 29 million project for the construction of a Holocaust memorial museum at Yad Vashem in Jerusalem, in conjunction with Minrav. Cementcal is also building the frame of an office tower for Bank Leumi at Beit Mani in Tel Aviv. It will house 9,000 square meters of office space, at a cost of NIS 14.5 million. Other projects include an office building in Bnei Brak (NIS 35 million); a residential complex in Givat Shaul (NIS 24.5 million) and a 10,000-square meter commercial project in Ramat Hasharon (NIS 80 million).