Bank Hapoalim asked the Tel Aviv District Court Wednesday morning to appoint a receiver for the 48% of Elbit Imaging's share capital it holds as security for a loan to Europe-Israel, Elbit's parent.
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Hapoalim claims Europe-Israel, owned by Moti Zisser through which he controls Elbit Imaging, has been in violation of its loan agreement and is delinquent in payments. Europe-Israel owes the bank an estimated NIS 720 million, while the pledged shares of Elbit Imaging are now worth just NIS 128 million after the stock's value shrunk by over 90% in the past two years. Elbit Imaging itself also owes Hapoalim about NIS 240 million.
Hapoalim's action also followed an announcement by Elbit Imaging earlier in the morning outlining a restructuring agreement with its two largest bondholders, York Capital Management Global Advisors and Davidson Kempner (DK) Capital Management. The agreement calls for the conversion of NIS 2.5 billion in company bonds into 86% of its share capital on a fully-diluted basis.
Other provisions of the agreement include: Zisser would stay on as CEO "for the sake of the company and its continuing operations" although he is expected to relinquish control; the company's NIS 300 million in secured debt – NIS 240 million owed to Hapoalim and NIS 60 million to Bank Leumi – will be repaid in full; and a new NIS 300 million bond series will be issued at 8% interest paid semi-annually, redeemable in one lump sum after five years.
Elbit Imaging, which specializes in real estate development in Eastern Europe and India, suffered heavy losses in recent years – due in part to a sharp drop in the value of its properties in Europe. Zisser himself is embroiled in heavy personal debts attributed to Europe-Israel.
Zisser's lack of alternate financial sources has been a source of worry for Elbit Imaging bondholders, as well as bondholders in Plaza Centers who were concerned that Zisser might use the subsidiary to repay Europe-Israel's debts.
Last week credit rating agency Midroog estimated losses arising to Elbit Imaging bondholders following a debt restructuring at 30% to 50%, and downgraded its bonds by five notches to Ca with a negative outlook. S&P Maalot previously downgraded the company's debt to D (default).