Eliezer Fishman, once one of Israel’s most powerful tycoons, had its personal assets put into receivership on Monday after a Tel Aviv court said his proposal to negotiate with creditors over a bailout was legally impossible for now.
Judge Eitan Orenstein of Tel Aviv District Court appointed attorney Yossi Benkel to act as special administrator for Fishman’s assets, and to report back to him on the former tycoon’s financial state by January 11. In the meantime, Fishman was ordered not to leave the country.
The order came a week after Fishman, in a last-minute bid to stave off bankruptcy, proposed a bailout for 1.8 billion shekels ($470 million) in unsecured debt he owes. He proposed that creditors write off all but 90 million shekels of the total, but he made the offer in the context of an opening position in negotiations he asked Orenstein to order.
On Monday, the judge rejected the idea for now, saying it put the legal cart before the horse.
“Fishman’s blood isn’t redder than any other debtor’s and the law sets procedures which say that when a receivership order has been given and after an [administrator] has been appointed and he has done his investigation, then a debt arrangement can be proposed,” Orenstein said.
The decision is a major setback for Fishman, the latest of the businessmen who rode high in the Israeli business sector a decade or more ago before the global financial crisis and Russia’s descent into recession saddled them with huge, unpayable debts.
Last week, one of Fishman’s fellow tycoons of that era – Nochi Dankner, who once controlled the IDB group – was sentenced to two years in prison for share-price manipulation.
Fishman, who earlier this year lost control of his flagship company Jerusalem Economy Corporation to debt, owes an estimated 4.5 billion shekels to banks and other creditors, mainly due to personal guarantees he made on loans taken by his group of closely-held companies. Monday's hearing dealt with 1.8 billion of that debt that is unsecured.
Creditors had been patient with Fishman until last August, when the High Court of Justice ruled that he owed 196 million shekels in back taxes from an assessment dating to 2006. Unlike Fishman’s other creditors, the Israel Tax Authority moved quickly to have Fishman put into receivership and the other nine creditors, including most of Israel’s biggest banks, followed suit.
In September, Orenstein said there was no question that Fishman was insolvent, but Fishman sought to have the issue brought to arbitration. The banks agreed but the Tax Authority refused and Orenstein delayed any decision on the matter until Monday.
On Sunday, Fishman filed an income tax statement to the court in which he asked to offset his capital loss in 2015 against his capital gains of 2006, a move that would offset the debt to the Tax Authority.
In a Channel 10 news interview this week, Fishman said, “The Tax Authority has crossed the line. I do not owe it even a shekel.”
During Monday's hearing, Fishman’s attorney Shalom Goldblatt said the legal process was undermining efforts for his client to repay debt by reducing the value of his companies, and making it harder to raise cash by selling them. He cited, in particular, the problems of Monitin, the Fishman company that controls the financial daily Globes.
Since the petition for receivership was filed in September, “All the rats have come out of their holes” with claims against the company, he said. “Without the legal process, the newspaper would have been sold.”
But Orenstein dismissed the problem as the unavoidable consequence of the legal process. “There’s no question that a sale without receivership is preferable, but if that were the only consideration we’d have to close the receivership department,” he said. “That applies to every case.”
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