Clubmarket Creditors Face Tough Decision

Clubmarket will repay only 51 percent of its debts to major suppliers, and Bank Leumi will have to write off almost 90 percent of a loan to Clubmarket's owners, according to the proposed creditors' arrangement published by the supermarket chain's trustees yesterday.

Under the proposal submitted by trustees Shlomo Nass and Gabi Trabelsi, most creditors would receive considerably less than what they had expected. Leumi, for instance, would recoup only NIS 35 million of the NIS 300 million loan it gave to Clubmarket's former owners, the Borovich family, to finance their purchase of the chain. At the time, Leumi received Clubmarket shares as collateral, but when the chain collapsed, it had to lift its lien on the shares in order to enable Clubmarket to be sold to a new owner.

Altogether, the banks would be repaid 81 percent of what they are owed. They would, therefore, have to write off NIS 72.5 million worth of debt.

The chain's suppliers would be paid 51-68 percent of what they are owed, depending on the size of the debt. The repayment rate would be 68 percent for small suppliers, who are owed up to NIS 100,000; 63 percent for debts of NIS 100,000-500,000; 58 percent for debts of NIS 500,000 to NIS 1 million; 53 percent for debts of NIS 1-5 million; and 51 percent for the major suppliers, who are owed more than NIS 5 million. This offer represents a blow to the suppliers, who had expected to recoup 70-80 percent of their losses.

Finally, the trustees want the tax authorities to forgo everything they are owed, on the grounds that the settlement, by preventing Clubmarket's liquidation, would save the state about NIS 1 billion. Had the chain gone under, the trustees said, the National Insurance Institute would have had to pay Clubmarket's workers some NIS 400 million in unemployment benefits. The state would also have had to refund some NIS 100 million worth of value-added taxes to Clubmarket's suppliers, on account of the unpaid debts, while the losses incurred by the chain's creditors would have reduced their income tax payments by some NIS 500 million, the trustees argued.

Should the tax authorities refuse to waive payment of their debts, payment rates to the other uninsured creditors - meaning almost everyone except the banks - would be reduced by 6.5 to 9 percentage points, the trustees said. They are negotiating with the tax authorities on this issue; if no agreement is reached, the court will have to decide.

Clubmarket's creditors will meet next week to decide whether or not to approve the proposal, which Trabelsi and Nass termed "the best option for all the creditors, and perhaps even the only option."

The proposal did not specify what fee the trustees would receive for their work, saying that this decision should be left to the court.