The Tel Aviv District Court on Sunday cleared the way for Bank Hapoalim to seize real estate magnate Motti Zisser's shares in his company Elbit Imaging. The shares had been pledged by Zisser as collateral for a loan.
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"The evidence has created a solid foundation for acting on all the liens," Judge Eitan Orenstein said in his ruling. "Bank Hapoalim's position was based on solid and credible evidence." Orenstein named attorney Giora Erdinast as receiver for the shares in Elbit Imaging, which, despite its name, is principally a property development company.
The ruling is a major blow for Zisser, one of a host of tycoons who have become enmeshed in debt woes over the last several years and are fighting to keep their business empires from creditors. In Zisser's case, he pledged shares in Elbit Imaging, owned by his closely-held Europe-Israel Ltd., against a NIS 1 billion loan.
The shares are currently worth about NIS 100 million. The stock fell 5.8% to NIS 5.66 in trading on the Tel Aviv Stock Exchange Sunday.
"We are sorry about the ruling but more than that we regret that Bank Hapoalim did not agree to enter negotiations and preferred to use a lawsuit," said Zisser's attorney, Shalom Goldblatt. "It's clear now that what Bank Hapolaim has done is strike a critical blow at Europe-Israel and at Zisser."
Goldblatt said that if Hapoalim had entered talks with Zisser, who is negotiating a debt rescheduling solution with the company's largest bondholders, he had no doubt the bank would have got a better settlement. "The bank's management has obtained less value for the institution … We haven't understood its attitude from the beginning and don’t understand it today."
In response, Erdinast said Hapolaim had acted fairly and in a businesslike fashion. "The claim that if it had acted differently the bank would have received a bigger repayment has no merit," he said. "The bank acted in its best interest and Zisser's claims in this context have no merit."
Nevertheless, Hapoalim will have to wait 60 days before it can sell the shares, a period, Orenstein said, that will give Zisser sufficient time to file an appeal.
Goldblatt asked the court to delay acting on the decision, saying it would create irreversible damage and that Elbit Imaging's creditors were meeting on a debt arrangement plan. Bank Hapoalim's lawyers were equally adamant that the decision be implemented immediately.
They said the court could only considering delaying action on a ruling if it considered the odds of a successful appeal to be good. In the case of the Elibit Imaging shares, Hapoalim could compensate Zisser for any losses from the bank's taking them. The sole risk was that Hapoalim would resell the shares, in which case Zisser would not be able to recover them from the bank.
"We see a solution that strikes an appropriate balance in this context," Hapoalim told the court. "That balanced solution would be to disallow the bank from selling the shares at this stage … There is no reason to delay executing the decision."
Earlier on Sunday, Elbit Imaging told the court that a debt rescheduling it had proposed had been approved by 82% of its bondholders. The proposal, proposed by Elbit in conjunction with York Capital Management Global Advisors and Davidson Kempner (DK) Capital Management, would turn over control of 95% of the company to bondholders in exchange for erasing some NIS 1.9 billion of the debt it owes them.
A counterproposal by a group representing some of the bondholders had won only 33% of the votes and was rejected.
Elbit Imaging has been in default on debt repayments since February, as management attempts to forge a debt restructuring and give it a chance to divest its global property portfolio. The company controls shopping centers and hotels in Eastern Europe, India, Israel and the United States, as well as a side business in medical electronics.