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Bank Hapoalim's deputy chairman, Danny Dankner, and CEO Eli Yonas met yesterday in Cyprus with a representative of the Swedish SEB bank to discuss the implications of the credit that their joint subsidiary, Continental Bank, extended to the crashing Peled-Givony group.

SEB owns 36.7 percent of Continental, while Hapoalim holds the rest. Negotiations have been under way for several months regarding the sale of SEB's stake to Hapoalim, but no price could be agreed upon. Continental, which for all intents and purposes was run by Bank Hapoalim, has extended NIS 100 million in credit to Peled-Givony, although the bank's equity is only NIS 255 million. Needless to say, SEB is furious. Yesterday's meeting concluded without any practical results.

The Swedish bank became a shareholder in Continental two years ago when it bought the holdings of the German BFG bank, which established Continental together with Hapoalim.

SEB had full confidence in Bank Hapoalim to the extent that SEB's directors were not even present at all of the board meetings. SEB is now trying to understand how so much credit was extended to Peled-Givony.

The Peled-Givony group includes the Peled Fund, Hayl Holdings, Feuchtwanger Investments, Iscal, Mashav Refrigeration, Feuchtwanger Industries, Feuchtwanger Electro-mechanics and Afcon Control. The group has received credit from several banks, totaling some NIS 800-900 million. The banks were not previously aware of the criss-cross relationship among the various enterprises. The group's dire situation was revealed only a few weeks ago when the group failed to submit its financial reports.

SEB wants to know how Peled-Givony could secure a loan from Continental, while Bank Hapoalim itself refused to extend the group credit.

Hizkiya Hakmon Law Office, which represents SEB in Israel, refused to comment, as did Bank Hapoalim.

In a related development, Continental board member Dan Halperin resigned yesterday. Halperin said that since he served as chairman of Hayl Holdings, and Continental had asked the court on Sunday to put the company under receivership due to a NIS 52 million debt, he could not reconcile the conflict of interest and had to resign.

Halperin, who said that Hayl needed him more than the bank, rejected the possibility that there was already a conflict of interest when the company received the loan. "I did not participate in most of the discussions that preceded the loan and did not even read the minutes... I know less than anyone else," he said.