Bank Leumi has begun meeting with Israeli and foreign investors about buying control of Jerusalem Economy, the flagship company in tycoon Eliezer Fishman’s corporate empire, after he failed to repay 1.5 billion shekels ($388 million) in debt.
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Fishman is also conducting talks with potential buyers for all or part of the company, which owns real estate in Israel, North America, Europe, Russia, Ukraine and India. Russian oligarchs are among the potential candidates. In every scenario, Fishman would lose control of his company.
Fishman control 68% of JEC, which itself owes banks some 4 billion shekels. Some 40% of the equity holding is pledged to Leumi as collateral, and the rest to Bank Hapoalim, Mizrahi-Tefahot Bank and a host of other, smaller financial institutions.
Sources close to the talks with potential buyers say JEC would probably be valued at about 1.5 billion shekels. That is 36% more than its market capitalization on the Tel Aviv Stock Exchange, where JEC shares closed unchanged Monday at 13.45 shekels.
Out of a 1.5-billion shekel sale, Leumi would get about 600 million shekels, far less than what Fishman owes. However, it also holds collateral in some of his private property holdings, worth several-hundred million shekels, as well as his shares in the financial daily Globes.
All told, Leumi would likely have to write off between 500 million and 600 million shekels. But it has already provisioned for a 1-billion-shekel write-off.
JEC’s 1.1 billion-shekel market cap is less than its shareholders’ equity, reflecting fears that the company stands to lose several-hundred-million shekels due to its exposure to the troubled economies of Russia and its neighbors. JEC’s Mirland Development unit, which is traded in London, is negotiating a debt restructuring.
Six months ago, Leumi began negotiations with diamond heir Beny Steinmetz to buy control of JEC, but the talks collapsed.
The potential buyers with whom the bank is now conducting talks haven’t been disclosed, but market sources said they were unlikely to be Israelis in control of other publicly traded property companies because of limitations placed on them by the new Business Concentration Law.