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Who won the battle over the debt arrangement at Africa Israel? Was it the company's controlling shareholder, Lev Leviev? Did the investment bank Psagot and its CEO Roy Vermus, self-styled lone champion of the little man against the tycoons, prevail? Were the winners the retirees whose money is in Africa Israel bonds? Or were the winners other tycoons poised to make the same announcement, that they can't (or won't) repay their debt to the public?

To answer that question, it isn't enough to root through the exhaustive details of the debt arrangement agreed on by the Africa Israel management and representatives of the company's bondholders as dawn stole over the Holy Land last Friday. What we have to do is look back one year, to the height of the financial crisis.

Here is a brief recap of the "arrangements" proposed by the tycoons, the wealthy, powerful families, and their secret agents in business, media and government.

1 The first stage was when the big borrowers and their collaborators took advantage of the sense of shock in late 2008, to offer "the mother of all debt arrangements." Namely, they suggested that billions and billions of taxpayer money be used to help them repay their debts.

To create pressure on the government and prime minister-designate, they created the false impression that the crisis in the capital market was related to capital market reform (the Bachar reform, engineered by former Finance Ministry director general Joseph Bachar).

The fact that the capital market reforms carried out by the government spared Israel from the worst crisis in its history was glossed over and obscured, in the hope that the government would lose its collective mind and shove its paws into the public's pockets to cover the tycoons' debts. Happily, successive finance ministers Roni Bar-On and Yuval Steinitz as well as treasury official stood steadfast against the pressure from the tycoons and the press and rejected the very idea of a massive injection of capital into their companies at the public's expense.

2 When the big borrowers realized they weren't about to get rescued by the unwashed masses, they concocted a new plan. Instead of harnessing the taxpayer to their wagon, they'd harness the savers in provident and mutual funds, life insurance schemes and pension funds. Suddenly the idea of a "general moratorium" popped up - namely, that all the big borrowers would be given more time to return their debt, in exchange for a 1% increase in interest to their lenders.

That idea was sponsored not only by the tycoons' lobbyists but by not a few of the people managing other people's money - provident funds, insurers and pension funds.

In other words, the people who are supposed to represent Israel's savers and demand significant compensation from borrowers who miss their repayment deadlines took the side of the borrowers and together devised creative ways to hurt the public and ruin the capital market.

Happily, that idea fell through too, crushed by its sheer absurdity, financial and economic.

The smoke screen lifts

3 The third stage arrived when the capital market began to recover. As expected, it turned out that some managers had run their companies conservatively and the companies would therefore be able to meet their liabilities to the general public. Other managers had made bad decisions during the better times, or were simply inveterate gamblers, and their companies probably would not be able to meet their liabilities.

It was the stage for each of them to stop skulking behind the smoke screen of the "crisis" and suggest a way out their financial morass.

The biggest borrower needing to reschedule debt was Lev Leviev, who convened a press conference two months ago and announced (in contrast to statements he'd made when the crisis began to snowball) that his company Africa Israel couldn't repay its debt in time.

When the negotiations with Africa Israel began, it turned out that only Roy Vermus of Psagot meant to take the militant stance they all should have, these people who manage other people's money. Most of these people who manage other people's money stayed silent.

The arrangement that the representatives of Israel's institutionals reached last week with Africa Israel had all the hallmarks of protecting the public's money. Leviev had to pony up some of his personal fortune. His holding in Africa Israel was to be substantially diluted. The company will be giving its bondholders higher interest.

The deal closed last week, in which Leviev is to inject NIS 750 million cash into Africa Israel, is drastically better than the arrangements suggested a few months back.

But is it the best arrangement the institutional investors could have reached? Probably not. Leviev remains with a controlling 52% interest of Africa Israel's stock.

Institutional investors have tremendous power. If they'd joined forces, they could have forced Leviev to inject much more money and to wind up with fewer shares.

Leviev's reputation is at stake: He would have done a great deal to avoid the terrifying possibility of watching his company slide into liquidation.

Does that mean Vermus' tactic of handling negotiations through the press was misguided?

On the contrary. If not for Vermus' aggressive stance in public, which locked him and the rest of the institutional investors into position, the final arrangement reached at Africa Israel would probably have been a lot worse for savers.

Vermus could have gained more for his clients had the other institutional investors joined him in his battle to rescue their clients' money. Last week Vermus commented that the arrangement at Africa Israel met his lowest expectations: in future debt arrangements Psagot will be demanding greater dilution of, and greater cash infusions by, the controlling shareholders.

Vermus understands that the next debt arrangements will have a tremendous impact on the value of corporate bonds held in the public's portfolios and on the balance of forces between savers and company owners and managers.

The Africa Israel battle brought the structural problem of Israel's capital market into sharp focus. Some of the managers of Israel's institutional investors are not capable of behaving independently when fighting on behalf of their clients, because their own strings are being pulled by the big borrowers.

This may well be the moment for the new Director General of the Finance Ministry, Haim Shani, to get into the picture. Shani, former president CEO of technology company NICE Systems, is a seasoned capital market animal and a very wealthy man. Like his predecessors at the Finance Ministry he will discover that unless he sets himself an independent agenda of structural reforms, he'll turn into just another empty suit.

Shani and Finance Minister Yuval Steinitz need to appoint a new supervisor to the capital market. The financial crisis that shook the world and the advent of a new director general to the ministry have created a golden opportunity to start a new, post-Bachar reform. Call it the Shani Reform. Its goal will be to create a capital market in which the managers of Israel's institutional investors can devote their efforts solely and only to benefiting their clients.