Nochi Dankner, who not long ago was one of the most powerful and influential people in the Israeli economy, may soon have to turn to the courts to file for personal bankruptcy, sources in the banking industry told TheMarker Monday.
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Alternatively, he might pursue another strategy and ask his bank creditors to forgive his debt in exchange for members of his extended family repaying 10% of the money he owes personally, just short of $300 million (1 billion shekels).
His biggest creditor is Bank Leumi, with loans outstanding of $128 million (450 million shekels). Another 250 million shekels is owed to Bank Hapoalim and smaller amounts to Mizrahi Tefahot Bank, Israel Discount Bank and Switzerland’s Credit Suisse. All of them wrote off the loans in 2012.
Against that, Dankner has assets estimated in just the tens of millions of shekels. When asked by a Channel 2 television reporter this week what Dankner would do, his father, Yitzhak Dankner, responded: “What will he do? Ask him what he will do. For sure, he won’t be happy.”
Dankner stands to lose control of the IDB group of companies after creditors gave their backing on Sunday to a rescue plan proposed by Argentinian businessman Eduardo Elsztain and Israeli entrepreneur Moti Ben-Moshe.
In doing so, they rejected a counter-proposal by Danker and his ally, Ukrainian Alexander Granovsky, that would have enabled Dankner to retain some interest in the indebted conglomerate.
Until Sunday, Dankner’s creditor banks were waiting patiently for a resolution to the IDB debt crisis. But now that Danker will no longer be a part of the conglomerate’s recovery and is due to lose control over the business, he has no financial resources to repay his private debts. Many of these debts were taken in the name of limited liability companies, but he signed personal guarantees on them.
“I can only say that I don’t see where he can repay,” Yitzhak Dankner told Channel 2. “If he had been victorious in IDB − and I still hope that he will − then he could repay his debts.”
A source at one of the big banks said that the lender would wait for Tel Aviv District Court Judge Eitan Orenstein, who is presiding over the IDB affair, to approve the creditors’ vote on Sunday. The creditors, including bondholders and banks, gave the Elsztain-Ben-Moshe group more than the minimum 75% of their votes needed for the court to clear the bailout plan.
Once the court has decided, the banks will begin to act on Dankner’s personal debt.
“The banks will not concede anything to him,” said one senior banking source. “Each bank has its own personal guarantees from him. At the end of the day, everyone will need to divide up whatever assets there are.”
Sources at the banks see one of three scenarios playing out.
In the first, one of the banks petitions the court to seize all the assets registered under Dankner’s name based on the personal guarantees that he signed. All the other lenders will immediately follow suit, seeking their share of the assets. As far as is known, the biggest one is the NIS 40 million home he owns in Herzilya Pituach.
The second alternative, bankers see, is that Dankner will ask the court to declare him bankrupt, which would enable him to negotiate an orderly repayment of his debts. The problem with this option is that while the process is underway Dankner cannot resume his business activities under the law.
The third scenario, banking sources said, is for Dankner to raise some NIS 100 million from his family and ask the banks to forgive the rest of his debts. They assume he can raise that amount because that is what he had promised in family money as he tried to stabilize IDB in the early stage of the conglomerate’s financial crisis.
The bankers’ point of view is that they will get back more of their money than they could otherwise expect simply by seizing assets, which in total are worth no more than a few dozen millions of shekels.
In addition, the third alternative would save legal costs and a process that could drag on for years − and the bank would have been more assured of the outcome.
Another of the banks’ goals is to avoid a public hearing in court about the Dankner debt, if for no other reason that some of them continued to offer him loans long after it was apparent he wouldn’t be able to repay.
The banks’ attitude toward Dankner differ, with some sources expressing anger that the tycoon failed to keep his verbal commitment. Others have taken a softer attitude, attributing his problems to business failings and not to any attempt to defraud the banks.