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Israel Discount Bank has demanded that Grand Center Dizengoff St. Development & Investment Co. and Unicorn Investments, both controlled by the Kachtan brothers - Ezra and Eliahu - defray NIS 202 million worth of loans within 21 days.

The two companies borrowed the money to build an 18-story residential tower on the corner of Dizengoff and Frishman streets, in central Tel Aviv, a project long known to the locals as "The Hole" after many years of not progressing beyond the stage of digging for foundations. Grand Center has already written off NIS 19.5 million on the value of the tower - which was to include four underground parking levels, a pool, health club, and luxury apartments - should it ever be built. The hole has buried the funds of everyone involved - the bank, bondholders, shareholders, and a variety of smaller creditors.

Grand Center owes Discount NIS 67 million and Unicorn owes another NIS 135 million. Both companies reject Discount's claims, saying the demand that the loans be settled contravenes a prior agreement. Bank Discount's denial of the accord, the two companies added, opposes the norm, and therefore, is unacceptable.

Grand Center has yet to publish its 2002 financials. For the first nine months of the year, it reported a loss of NIS 12.2 million, boring an NIS 9.5 million hole in its equity. The company's regular operations generated a negative cash flow of NIS 7.6 million in the first three quarters of 2002, which may explain why it defaulted on its last payment to bondholders.

As for Unicorn, its shares may soon be as rare as its mammalian namesake: the company faces delisting from the Tel Aviv Stock Exchange after failing to comply with regulations.

Collapsing real estate firms that trade in Tel Aviv have ceased to be news as they have multiplied, but they do impact their financial backers - the banking sector and bondholders - once both happy to grant huge construction projects generous credit that will now apparently never be repaid. Discount Bank is a major real estate backer, already having written off NIS 4 billion in exposure to the sector. In the past year, the bank has adopted a far more aggressive strategy in demanding repayment, including asking the courts to liquidate laggards. The bank behaved in this militant manner with members of the Zeevi and Pritzker groups, among others.

At the end of March, AD Construction announced that Discount had demanded repayment by April 12 of NIS 127 million in credit for the Ashkelon Golf Village project, which resulted in a "going concern" warning tacked onto company's 2002 financials.