Analysis

The Fishman Debt: Is Israel's Bank Hapoalim Playing Tough or Playing for Time?

After years of forbearance, Israel’s biggest bank is suddenly at the forefront of efforts to declare the fallen tycoon bankrupt

Eliezer Fishman in court.
Ofer Vaknin

Tel Aviv District Court Judge Eitan Orenstein will soon have to decide whether to declared Eliezer Fishman bankrupt or order the fallen tycoon’s lawyers to go back to the negotiating table and try to reach a revised debt accord.

That wasn’t how the Fishman debt soap opera was supposed to play out. Until Monday, the debt agreement Joseph Benkel, the court-appointed administrator, had worked out with Fishman’s attorneys seemed to be on track to be approved by the creditors. The terms were controversial, leaving Fishman paying as little as 140 million shekels ($39.5 million) of the 1.7 billion in contention.

But on Monday Bank Hapoalim said it wasn’t satisfied with the terms and wanted them revised. That was the positon its lawyers took at the meeting of Fishman creditors, and the other banks, including Leumi, adopted the same stance.

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Sources who were at the closed meeting said creditors asserted that the agreement had too many loopholes and asked Benkel to present them with alternatives, including the option of bankruptcy. They asked hard questions about how much Fishman’s wife and adult children were contributing to the arrangement.

But when the meeting was over, Hapoalim suddenly announced it preferred declaring Fishman bankrupt, leaving Benkel no choice but to turn to Orenstein. The bank is the biggest of Fishman’s creditors, owed some 1.8 billion shekels, and so it has the most say.

Hapoalim’s decision isn’t final: Its board meets on Thursday to approve the strategy taken by management, but observers said the directors would almost certainly adopt the tough line on Fishman, once one of Israel’s most powerful tycoons but now weighed down by some 3.5 billion shekels in debt he guaranteed in the name of his closely held companies.

Meanwhile, sources close to Hapoalim CEO Ari Pinto have emphasized how he represents a new regime at the bank, and that he is not personal friends with Israel’s tycoon class. The bank has been making decisions on a purely business basis, they say.

New regime only there since August

Pinto only took over as CEO from his long-serving predecessor Zion Kenan last August. But whether Hapoalim will stick to its tough new line is another matter. At least one lawyer who is close to the proceedings but asked not to be identified said he believes the bank is simply buying time.

“Bank Hapoalim is alarmed by the fact that all the media have pounded on it and the bank is saying, ‘What do we need this for?’ It’s like the Colosseum in ancient Rome – the crowd is demanding a kill and it’s trying to please them.”

In fact, all the banks treated Fishman with remarkable forbearance over the years, long after he had ceased to repay the principal on his debt. But Hapoalim was the kindest of them all.

By comparison Bank Leumi started the process of seizing Fishman’s assets he had given as collateral on debt in early 2015, and eventually got control of Fishman’s biggest company, the property concern Jerusalem Economy Corporation, last year.

In the case of JEC, Leumi came out poorly, getting only 20 million shekels for its 40% stake, but overall it has collected hundreds of millions of shekels from the failed tycoon over the years while Hapoalim has wrung out just 250 million from him.

Hapoalim has never taken any operative steps to collect on its debt. It took three years to sell off Fishman’s service-station business Ten and it got only 137 million shekels for it. Efforts to sell his 90% stake in the Home Center DIY chain have been put off while the retailer tries to recover and efforts to sell his 34% of media group Yedioth Ahronoth have failed to attract any buyers..

The Israel Tax Authority, to whom Fishman owes tens of millions of shekels in back taxes, was the one who finally forced the other creditors’ hand when it sought to have him declared bankrupt. Hapoalim only signed on to the court action two weeks after Kenan stepped down.

When Fishman came back in December with his own debt accord, the tax authority rejected it but the banks supported it. And when Benkel initially suggested bankruptcy last March, the banks stayed silent.

The attorney close to the Fishman proceedings believes Hapoalim will eventually sign a debt accord when the situation calms down. “Fishman will be declared bankrupt and Bank Hapoalim will wait till the next uproar – a debt bailout for [Africa Israel’s] Lev Leviev – in order to sign a similar agreement,” said the lawyer.