Benchmarker / How Much Did Delek Real Estate Cost Tshuva?

At the depth of the 2008 economic crisis Tshuva distributed Delek Real Estate stock as dividends to Delek Group shareholders. In doing so the group was no longer hamstrung by the real estate subsidiary, and Tshuva assumed for himself direct control over Delek Real Estate.

For three years Yitzhak Tshuva had been trying to resuscitate Delek Real Estate, but the life support was largely for appearance's sake. Tshuva relies on Israel's capital market to provide him with capital for his myriad businesses. Delek Group has needed more and more funding since the Tamar gas field was discovered; that investment requires billions of shekels. Without support from the capital market and banking system, Delek will be hard pressed to get the giant project underway.

At the depth of the 2008 economic crisis Tshuva made a critical move: He distributed Delek Real Estate stock as dividends to Delek Group shareholders. In doing so the group was no longer hamstrung by the real estate subsidiary, and Tshuva assumed for himself direct control over Delek Real Estate. The move saved Delek Group. Delek Real Estate, saddled by NIS 11 billion in debts, was left to the market's mercy - and to Tshuva's interest in reviving it.

David Bachar

But this week it turns out Tshuva too got fed up, preferring to unload the company by ridding himself of his shares and rights in it, giving his bondholders a parting gift of NIS 100 million.

How much did Tshuva's Delek Real Estate adventure cost him in money and image? This is guesswork. Until the company was extricated from Delek Group it didn't cost him a dime. The group did invest in the company's stock but recovered most of it in dividends during the good years.

After spinning the firm off, Tshuva began pumping it with his money, totaling an estimated NIS 150 million. He also gave the company a shareholder loan and bought a portion of its bonds, which together made up another NIS 120 million. Then there is the final NIS 100 million Tshuva agreed to inject in the sale agreement, as a loan subordinate to all other company debt.

In total it appears the Delek Real Estate adventure cost Tshuva about NIS 370 million in personal losses. This would be painful, but it's nothing compared to the NIS 2.5 billion or so in losses created by Delek Real Estate over the last several years. Part of these losses will fall to bondholders in a debt settlement.

The cost to Tshuva's image is much harder to quantify and will become clearer based on how other companies under his control are treated when they approach the Israeli capital market to raise funds.