For years now Israel has witnessed the travails of many a tycoon, most famously Nochi Dankner, the former controlling shareholder of the IDB group. He and other erstwhile super-rich have fallen on hard times, but many continue to maintain lavish lifestyles, and Israel’s banks have been patient for the most part.
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“If you owe a lot, the bank will patiently wait until you sell assets. That’s all. If you don’t have a lot, they don’t wait because they don’t have anything to wait for,” slumping tycoon Eliezer Fishman told Channel 2 television.
“All the assets are put up for sale and they gradually sell them off. The banks take the money. Period. I don’t know if I’ll manage to repay all my debts, but they’ll get what the assets are worth. Every bank knows if it should be worried or not.”
That was the first time Fishman acknowledged that he might pay all his personal debts, which may be the largest of any Israeli today. His Fishman Group’s holdings include retailers Betili and ID Design, as well the publicly traded real estate developer Jerusalem Economy Corporation.
Through his closely held companies he owes banks about 4.5 billion to 5 billion shekels ($1.3 billion), about 2 billion of which is to the country’s two largest banks, Leumi and Hapoalim. Fishman also owes about 200 million shekels to the Israel Tax Authority, which on Thursday gave him a week to settle arrears dating from 2006 or face bankruptcy proceedings.
Fishman and Dankner have company; the club of struggling or failed Israeli tycoons includes Motti Zisser, who lost control of the real estate company Elbit Imaging, and Joseph Greenfeld, who controlled the real estate company Kardan. Each owes hundreds of millions of shekels that the banks know they’ll never fully collect on.
Even as they were holding their creditors at bay, these poor little rich men traveled the world in private jets. If more recently they’ve had to forgo that luxury, they still live in opulent homes, fly business class and try to convey a sense of business as usual.
Dankner, for example, was on what he termed a business trip to South America last month when his helicopter was forced to make an emergency landing in the jungle. What are his business interests there? On whose behalf was he there and who was paying his expenses? He’s among the few to know.
Fishman, meanwhile, still lives in a large house in the opulent Tel Aviv suburb Savyon. Dankner, who was slated to vacate his house in Herzliya Pituah based on his debt settlement with the banks, is still living in the seaside community.
And Greenfeld has fought efforts to have him and his family evicted from Tel Aviv’s Akirov Towers. Although it’s true that Zisser was forced to sell his home in Petah Tikva, his children still live in large houses nearby.
Fishman still has considerable assets, including real estate from undeveloped land to refrigeration facilities, along with the Israeli outlets of retailers Celio and Toys R Us. There’s also floral chain Zeru 4 You, the Home Center chain and a minority stake in the Yedioth Ahronoth media group.
But however you look at it, his assets are a few billion shekels short of covering his debts. Since the banks have already made provisions for most of the debt as uncollectable, Fishman doesn’t threaten their balance sheets.
Fishman had to give up his private plane, but he and his wife still live in their Savyon home thought to be worth about 30 million shekels. Its sale wouldn’t go far in addressing the debt.
Israel’s banks have acknowledged that they almost never evict people from their homes and say that when it comes to major debt, the process is particularly complicated. For his part, Fishman has made hundreds of millions of shekels in interest payments over the past decade, and the banks, for reasons of their own, have been pretty patient.
After the value of JEC’s real estate in Russia and Ukraine plummeted a year ago, Bank Leumi initiated proceedings to force the sale of Fishman’s 40% stake in the company that it held as collateral.
About six months ago, Leumi arranged the sale of Fishman’s shares in JEC to a group led by the Nakash brothers, who made their fortune in designer jeans, for 370 million shekels. But the Nakashes backed out and in the interim the value of Leumi’s collateral shrank to just 185 million shekels.
True, Leumi CEO Rakefet Russak-Aminoach was the only Israeli bank chief to launch collection proceedings, but she has been lambasted for the bank’s mistakes in its dealings with Fishman and the JEC share sale. Meanwhile, the Fishman stake’s value has dropped 28% since JEC issued 200 million shekels in new shares in a November rights offering.
Hapoalim CEO Zion Kenan has chosen a softer strategy with Fishman. The bank has eschewed major efforts to collect the debt, pushing instead, for example, for the sale of Ten, Fishman’s filling-station business.
The bank arranged to reschedule debt for Fishman’s Home Center stores and is in talks with the Yedioth group and its controlling shareholder, Arnon Mozes, to sell him Fishman’s shares that serve as collateral. Fishman also owes several hundred million shekels to Israel Discount Bank, Mizrahi-Tefahot Bank and Union Bank, none of which, as far as is known, have taken steps to collect.
Zisser, who personally owes Hapoalim 1.4 billion shekels that he cannot pay, has been in a long dispute with the bank, which is trying to force him into bankruptcy. The bank “has decided to eliminate Moti Zisser because it simply hates him,” he told Channel 2. Zisser said he has been treated more harshly than other large borrowers in trouble like Fishman and Dankner.
He has a point. Zisser not only lost his private plane, he was evicted by Leumi from his opulent home in Petah Tikva’s Kfar Ganim neighborhood, which had been pledged as security on debt Zisser owed. It was ultimately sold to Zisser relatives for 28 million shekels, of which 17 million went to repay Zisser’s mortgage on the property. The rest went to Hapoalim.
Zisser’s children David and Hila continue to live in homes on smaller lots nearby, and bank sources say Zisser is now living with one of them. But his troubles aren’t over: Hapoalim is trying to take control of those properties, too.
It has been two years since Dankner lost control of IDB, whose holdings include Israel’s biggest supermarket chain and cellular operator, and more than three years since he stopped making payments on his personal bank debt. The latter is estimated at about 500 million shekels, much of it owed to Hapoalim and Leumi.
After losing IDB, Dankner approached the banks over a debt rescheduling agreement, but nothing has been finalized. The banks are apparently waiting to see how legal proceedings alleging that Dankner took part in share price manipulation pans out.
Whatever Dankner ends up paying the banks is expected to come from three sources: his father Yitzhak, the sale of his Herzliya Pituah house, which is thought to be worth about 40 million shekels, and any future income Dankner earns. Again, Dankner and his wife are still living in that house.
Greenfeld, meanwhile, is 350 million shekels in debt, much of it to Hapoalim and Leumi, and he can’t pay it off. The value of his shares in Kardan NV and Kardan Yazamut has plunged 95% in recent years. Last March, Leumi began bankruptcy proceedings against Greenfeld, who along with his wife Georgette had owned three luxury apartments in Tel Aviv’s Akirov Towers.
Ofer Shapira, who is managing Greenfeld’s assets for Leumi, sold one of Greenfeld’s apartments for 6.2 million shekels while another is about to be sold for about 10 million. Last week Leumi submitted a request in court to move ahead with a sale, for 14 million shekels, of the apartment where Greenfeld and his wife are living.
Georgette Greenfeld is objecting, claiming that the apartment belongs to her and not her husband. Either way, her husband is expected to leave creditors facing hundreds of millions of shekels in losses.
While Dankner hasn’t been forced into bankruptcy by the banks, Mizrahi-Tefahot tried last year to force his uncle Shmuel Dankner into bankruptcy over a guarantee of a 7-million-shekel loan to the Dankner family’s Elran Investments. In an October 2014 petition, Mizrahi said the company had been stripped of assets. The two sides are trying to resolve the dispute.