Bank Leumi reached an agreement on Thursday with struggling businessman Eliezer Fishman to sell hundreds of millions of shekels of assets to help repay 1.8 billion shekels ($470 million) in private debt he owes the bank.
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Under the agreement, Leumi attorneys will work with Fishman’s lawyers to sell the assets, mainly real estate, he had put up as collateral on loans under supervision of the courts. The bank agreed not to unilaterally exercise its right to take control of the assets or other collateral, including Fishman’s controlling stake in the financial daily Globes, in favor of a cooperative effort.
Leumi estimates that the assets could fetch as much as 400 million shekels.
Fishman and his 4.5 billion shekels of debt is the biggest of a clutch of troubled, big-name debtors that include the former real estate magnate Moti Zisser and Lev Leviev, the controlling shareholder of Africa Israel Investments.
It also includes Nochi Danker, who once controlled the IDB group, Joesph Greefeld, who once controlled the real estate company Kardan; Shraga Biran, who controlled by Alon Blue Square group and Jacob (Jacky) and Marc Schimmel, Dankner’s former partners in control of IDB.
These former and current tycoons owe the banks some 8 billion shekels in private debt. More than half — 4.4 billion shekels — is owed to Bank Hapoalim. Leumi is next, with some 2.2 billion shekels in problem debt on its books from the seven.
Dankner, who was one of the most powerful businessmen in Israel before he lost control of IDB in a debt bailout, reached an agreement nearly two weeks ago with his six creditor banks that forgives 60% of the 500 million shekels he owes them.
Leumi, which is owed 120 million shekels of the total, went along with the other banks in the arrangement. Three years ago Leumi unleashed a torrent of criticism against it when it agreed unilaterally to write off 150 million shekels that Dankner owed it, in a one-on-one deal.
Leviev, who owes Leumi 120 million shekels, recently opened talks with his lenders about the 1.1 billion shekels in private debt he owes them. He wants to delay the first 180-million-shekel payment due in November by his closely held investment vehicle Mamorand.
Leumi is resisting Greenfeld’s proposal to erase 95% of his 290-million-shekel debt to the banks, of which 110 million shekels belongs to Leumi. The Tel Aviv District Court has ordered Greenfield and his creditors to arbitrate their dispute in a process to be supervised by Judge Varda Alsheich and return with an agreement in September.
A 22-million-shekel debt the Schimmels owe Leumi was backed up by a 9.2% stake in Ganden, the holding company that once controlled IDB, but the stake will be hard to collect because it turns out to be controlled by trustees in overseas tax shelters.
The 4.5 billion shekels of problem debt on Hapolaim’s books will be one of the first matters facing its incoming CEO, Arik Pinto. Pinto, whose appointment was approved by the Bank of Israel over the weekend, may take a tougher line than his predecessor, Zion Kenan, against the bank’s tycoon debtors.
Like Leumi, Hapoalim has already written down the problem debt, so failure to collect on it won’t appear in future profit-and-loss statements. Any successes, however, will be reported a “recovery.” It would also send a message that big debtors get the same treatment as others.
Fishman owns Hapoalim 1.8 billion shekels, 1 billion shekels of which he borrowed 17 years ago when he acquired a minority stake in the Yedioth Aharonoth publishing group. The bank has as collateral Fishman’s personal assets as well as 34% of Yediot group, 75% of his holding in the Ten Petroleum gas station chain, 90% of home improvement chain Home Center among others.
Hapoalim has declined to publicly disclose its policy in collecting the debt. In the past it tried, and failed, to find buyers for the Ten stake. The bank would presumably prefer to not try to dispose of Home Center, which is in a highly competitive segment and has had poor results, requiring Fishman to inject cash as part of a bailout with the retailer’s bondholders.
TheMarker revealed this month that Noni Mozes, the controlling shareholder of the Yedioth group, sought a foreign investor to take Fishman’s stake as well some of his own stock. If it happens, Hapoalim might get some 350 million shekels.
Like Leumi, Hapoalim is now in talks with Leviev, whose private investment vehicle Mamorand owes it 700 million shekels of the 1.1 billion shekels in debt it holds. Hapolaim was surprised at the request because Leviev has been reliably repaying about 200 million shekels every year.
Leviev has tried to project an image of business as usual, but the financial situation of his real estate empire, centered on Africa Israel, is poor because of its exposure to the troubled Russian economy. Africa Israel is negotiating a se debt bailout and Leviev is under pressure to inject cash.
The bank has done little to collect on the 150 million shekels Dankner owns it, or the 120 million shekels Greenfeld owes it. Unlike Leumi, Hapolaim was agreeable to Greenfeld’s offer.
The fate of the 1.4 billion shekels Zisser owes Hapoalim is unknown, but the bank is unlikely to collect on most of it. The same goes for the 350 million shekels Biran owes through his closely held Alon Retail. A decision on the debt of the entire Alon Group, which is controlled by Biran and others, will be decided once bondholders decide whether to make good on their threat to liquidate the company to collect what they can of the 1.7 billion shekels owed them.