Bronfman Investors Slam Regulator's Decision

The securities authority is demanding that Isralom Properties owners issue a declaration of assets, and could halt company bond trading if they dont comply.

Isralom Properties bondholders have criticized the Israel Securities Authoritys recent decision requiring the companys controlling shareholders to issue a declaration of assets.

Isralom, an investment company that specializes in real estate development and management services, is owned by Matthew Bronfman, a scion of the famed Canadian family of philanthropists, and Yaakov Shalom Fisher.

"The [securities] authority's position isn't accepted by bondholders and isn't reasonable," said a source close to Isralom Properties bondholders.

The authority's request comes on the heels of an agreement that was reached at the end of last week between Isralom's bondholders and the company's management, according to which Bronfman and Fisher will personally guarantee the repayment of their company's debt. If the company's owners don't issue a declaration of assets the authority is likely to order a halt to the trading of Isralom bonds.

Isralom and the Securities Authority refused to comment on the reports before receiving the backing of bondholders' representatives.

In the past, the Securities Authority also requested that Israeli tycoon Yitzhak Tshuva, the controlling shareholder of Delek Real Estate, issue a declaration of assets in the framework of a debt restructuring at that company.

The authority requests such a declaration in order to protect investors who would like a restructuring company's bonds, and want to be capable of pricing the bonds without having to rely solely on the good name of the controlling shareholder.

A source close to Isralom bondholders rejected any comparison made between Delek Real Estate and the agreement reached with Isralom.

"The case with Isralom is drastically different," the person said. "In this case, the issue isn't a new bond issue, but an external guarantee provided by a controlling shareholder to shore up the company's outstanding bonds. Beyond this, the company [Isralom ] continues to serve as the primary guarantor to bondholders and its assets are to be used to service the debt, with the controlling shareholder's guarantee playing only a secondary role to shore up the bonds."

According to the same source, the authority seems to have arrived late to the game to be demanding a declaration of assets now, since there isn't a material difference between the debt obligations guaranteed by the controlling shareholders at the present time, compared with the guarantees they issued in March 2012.

"The change in the term of repayment was lengthened from two years to four years. That doesn't present any material injury to the interests of the bondholders, or require a halt to trading in the company's securities," said the source.

Over the last year and a half, Isralom has been mired in a financial morass as a result of the plummeting value of its main investment, an 18% stake in the Super-Sol supermarket chain. The 70% drop in Super-Sols value was sparked by the social justice protest, which ate away at the chains profitability and led to growing competition from supermarket discount chains.

With the decline in the value of its Super-Sol holdings, Isralom fell afoul of its financing stipulations with the banks, prompting concern that the company would be hard pressed to repay its debts. It owes some NIS 215 million in outstanding bonds to investors.

Matthew Bronfman
Ofer Vakhnin