Banks Setting Aside NIS 400 Million for Fishman Debt in 4Q

Big provisions come as value of tycoon’s Russian real estate assets plummet; Israeli lenders have so far set aside about 60% of the value of his loans - between 2.7 billion and 3 billion shekels.

Moti Kimche

Provisions Israel’s banks will be taking against the possibility that entrepreneur and investor Eliezer Fishman becomes overwhelmed by debt may reach 400 million shekels ($100.4 million) in the fourth quarter of 2014 alone, banking sources estimated on Suday.

The banking industry got a small taste of things to come when Union Bank of Israel, a tiny lender, reported on Sunday that its 2014 net profit plunged by close to to 50 million shekels, or a return on equity of just 2.1%, due to a 130 million-shekel provision it had to take against one particular borrower.

The bank didn’t say in its financial report that the borrower was Fishman, but banking sources confirm it was.

Fishman, whose debts to the bank are estimated between 4.5 billion and 5 billion shekels, has run into severe financial problems as the collapse of the ruble and fears Russia is sliding into recession have hit the Russia real estate portfolio of his company MirLand.

MirLand has asked bondholders to reschedule its debt, and on Sunday its parent company, Jerusalem Economy, said it was writing down assets as a result of MirLand’s problems (see story on this page).

Banking sources said Israeli lenders have so far set aside about 60% of the value of the loans, meaning somewhere between 2.7 billion and 3 billion shekels, in most cases spread out over the next 10 years, weighing on profits all that time.

None of the banks nor Fishman’s spokemen agreed to comment on the reported amounts.

Fishman has repaid a substantial part of his bank debt but the banks’ exposure remains high. Although he has been delinquent in repaying, the banks have refrained from taking any legal action.

Apart from JEC and MirLand, he controls the real estate companies Industrial Buildings Limited and Darban as well as the energy distributor Ten, the Brazilian cellphone tower owner T4U, the financial daily Globes and the retailer Home Center Israel. He is also a shareholder in the Yedioth Ahronoth group and has a personal portfolio of real estate worth hundreds of millions of shekels.

The banks with the biggest exposure to Fishman are Hapoalim and Leumi, each of which has loans worth about 1.7 billion shekels outstanding with him.

Hapoalim has made 1.1 billion shekels of provisions. The loan was mainly used by Fishman 15 years ago to buy a 34% stake in the Yedioth Ahronoth media group, whose value has since declined sharply.

In the fourth quarter, industry sources said Hapoalim would likely set aside another 70 million shekels against Fishman’s debt after a 62% drop in JEC shares. JEC shares, representing 6% of the total, serve as collateral for the loans.

The bank also has as collateral shares in Ten as well as in Home Center and some of Fishman’s land assets.

Leumi has set aside between 1.1 billion and 1.2 billion shekels against Fishman’s debt. The bank has as collateral 40% of JEC shares worth about 500 million shekels as well as hundreds of millions of shekels more in land controlled by Fishman as well as Globes.

As a result of the drop in JEC’s market capitalization during the last quarter, Leumi will be making provisions of between 100 million and 150 million shekels.Fishman owes another 400 million to 500 million shekels to Israel Discount BankThe bank, it is ebelieve, will set aside as much as 80 million shekels in the quarter on top of the 200 million it has already done.

Mizrahi Tefahot is owed between 300 million and 400 millions shekels. Mizrahi, banking sources estimate, will make an approximately 50 million-shekel provision for the fourth quarter.