The creditors of Eliezer Fishman are due to vote on a debt bailout on Tuesday after the once high-flying tycoon reached an agreement with a court-appointed administrator that will let him write off as much as 92 percent of what he owes.
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Terms of the agreement, which were released late on Saturday night, call for Fishman to initially repay just 140 million shekels ($39.5 million) of the 1.7 billion of debt not covered by his assets, which adds up to a 92 percent haircut for his creditors. The agreement entitles his family to buy back stock in two of his companies in another five years for 260 million shekels, which would then be handed over to creditors and leave them with a 76 percent haircut.
If approved by creditors and then given a green light by Tel Aviv District Court Judge Eitan Orenstein, the agreement will end months of bitter acrimony between Fishman and Joseph Benkel, the attorney Orenstein had appointed to manage the bailout after the judge rejected Fishman’s initial debt proposal last December. That called for creditors to write off 95 percent of the debt they hold.
Fishman is among the biggest of Israel’s tycoons to see their fortunes fail in the aftermath of the global financial crisis in 2008 and the Russian economy’s slide into recession. Fishman lost control of Jerusalem Economy Corporation, his most important asset, last year and Lev Leviev is poised to lose control of his Africa Israel Investments (see The Ticker on this page).
Fishman’s portfolio of closely held companies owed some 4.5 billion shekels to about 10 creditors, including most of Israel’s banks and the tax authority. Of that, Fishman personally guaranteed about 3.4 billion, but the combined value of his collateral is only worth about half of that.
Apart from letting him write off the lion’s share of what he owes, the debt agreement would also save him having to declare personal bankruptcy. The agreement will also allow his adult children to keep the assets they were given by their father as gifts over the years.
The assets transfer was among the sharpest points of contention between Benkel and Fishman over the last few months. Benkel asserted that the Fishman family had transferred the assets to the next generation to protect the father in case he went bankrupt, a claim Fishman’s lawyers disputed.
Benkel also claimed the family was stonewalling him in his efforts to uncover assets in what he termed a “war of attrition.” In the end, Orenstein ordered the two sides to compromise.
The agreement that creditors will be asked to vote on Tuesday requires Fishman to sell off all his personal assets, including real estate, securities and money held in bank accounts. If the value of the assets comes out to less than 140 million shekels, Fishman’s adult children – Anat Fishman-Menipaz, Ayal Fishman and Ronit Fishman-Ofir – will be required to contribute to top up the money owed. The agreement calls for the children to fully cooperate with Benkel and creditors.
Fishman and his wife Tova will also be required to give up their home in the Tel Aviv suburb of Savyon within two years after the agreement goes into effect. If they fail to sell it by the deadline, Tova Fishman will be entitled to rent out the property.