Bank Hapoalim foreclosed 125 million shekels ($36 million) of financial assets belonging to the financially troubled Steimatzky bookstore chain Thursday.
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The move came as the bank extended the retailer’s credit line by 4 million shekels to enable it to continue operating for at least another three months, as its owner – the Markstone Capital Group private equity fund – tries to find a buyer.
The bank, which has some 140 million shekels in loans outstanding to Steimatzky, foreclosed on bank deposits and financial assets that the bookseller had given as collateral, as well as other assets pledged by Markstone.
Israel’s biggest book retailer, Steimatzky is saddled with debt from its 2005 acquisition by Markstone, its woes compounded in recent months by slowing sales. On Wednesday, Markstone agreed to inject 8 million shekels into the chain, alongside Hapoalim increasing its credit line, as it tries to sell the business.
Markstone and Hapoalim, which is reportedly the only bank to have lent money to the bookseller, are counting on higher sales during the Passover holiday next week and Hebrew Book Week in June to help Steimatzky over the next three months.
Sources in the book industry told TheMarker that Steimatzky CEO Iris Barel told them she was unaware of the extent of the retailer’s financial problems until the last few days, after the death of Amir Kess, the Markstone partner who chaired the company.
Kess was killed in a traffic accident while cycling to work last week, leaving his partner, Ron Lubash, in control.
Markstone is likely to receive only tens of millions of shekels for the chain, which it acquired nine years ago for $55 million. Lubash has been in contact with at least three prospective buyers, with the aim of selling the chain in the next several days, if possible.
Industry sources say Steimatzky has been pressured by the deep discounting in book retailing that has emerged in recent years, as Tzomet Sfarim grew and became a major rival. But they said the debt it carries was the cause of Steimatzky’s current crisis.
“It’s true that there were years that Steimatzky lost money, but it became more efficient, and in recent years has posted an operating profit,” a source, speaking on condition of anonymity, said.