Nervous Urbancorp bondholders got some relief from the Tel Aviv District Court on Monday after it named an attorney as an officer of the company with the power to seize any assets that may be needed to service it debts and begin the process of a debt bailout.
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“The company has violated its obligations to bondholders in such a way that they have the right to seek immediate repayment,” Judge Eitan Orenstein wrote in his decision appointing attorney Guy Gisson to the post.
“The company has no management backbone — all the directors apart from the controling shareholder have resigned, there is no internal auditor and its legal advisers have ended their relationship with it,” Orenstein said.
Orenstein acted at the behest of Urbancorp bondholders there days after the Canadian property developer filed for bankruptcy in a Toronto court without any advance notice. The filing came less than five months after Urbancorp sold 180 million shekels (nearly $48 million) in bonds in Tel Aviv to Israeli institutional investors.
Orenstein expressed particular concern over plans by Urbancorp, which is controlled by Canadian Alan Saskin, to sell a 50% stake in five residential projects for tens of millions of dollars to Mattamy Homes, one of Canada’s biggest housing companies.
“It’s quite possible that the proceeds will not reach the pockets of the bondholders. Only an officer [of the company] can monitor the transaction and prevent as much as possible irreversible damage to bondholders,” Orenstein said.
In spite of the fall from Urbancorp, three other North American property companies are moving ahead with planned bond sales totaling about 1 billion shekels. On Monday, Formation Capital joined the list, meeting with underwriters to lead an issue of between $100 million and $200 million.
As 17 North American companies floated bonds on the Tel Aviv Stock Exchange since 2008, most in the last two years, it was inevitable that one would encounter problems, said one underwritng consultant. But he said Urbancorp’s woes won’t bring an end to the phenomenon.
“There are those who see all American real estate companies as one and the same, but that’s wrong,” said the consultant, who asked not to be identified. “I expect that we’ll see fewer developers, which are riskier, and more companies with a portfolio of income-producing properties. At the end of the day, American bond issues are good for everyone.”