Prime Minister Benjamin Netanyahu sought over the weekend to distance himself from Shaul Elovitch, whose telecommunications empire is being pressed by securities investigators on one side and by banks and investors on the other.
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The prime minister had kept aloof from the nearly four-week–old investigation into Elovitch and his group of companies. But last week the probe drew nearer to Netanyahu as Shlomo Filber – an associate who the prime minister had appointed as director general of the Communications Ministry – was put under house arrest for his alleged role in creating a back channel of confidential information to Elovitch.
Elovitch, who is the controlling shareholder of Bezeq, is widely believed to be friends or friendly with the prime minister, but how much so depends on when you ask.
Over the weekend, a post on the prime minister’s Facebook page called the link between him and Elovitch “fake news” that represented “another futile attempt to create an affair out of thin air against the prime minister. ... In relation to Elovitch, he had a friendly relationship, and nothing more.”
Netanyahu also called a meeting of his closest political allies to spread the message, which resulted in coalition whip David Bitan saying, “There’s no way Netanyahu acted inappropriately regarding Elovtich. Elovtich isn’t his friend.”
But last November, Netanyahu described his relationship with Elovitch differently.
Attorney Shahar Ben-Meir filed a court petition seeking details about meetings between the two, citing the attorney general’s decision to prevent Netanyahu, who had been serving as communications minister, from dealing with any issues connected with Elovitch and his group of companies.
In the response, Netanyahu’s attorney – David Shimron, who is now ensnared in the so-called submarine affair – termed the relationship an old one.
“There was nothing in the [attorney general’s] opinion that requires Netanyahu to avoid meeting periodically with Elovitch, which goes back many years between them and their spouses. To the contrary, the order relates only to his statutory authority when it involves a conflict of interest,” he wrote.
Meanwhile, the unfolding investigation – which began with suspicions about a 2015 deal by Bezeq to buy Elovitch’s stake in the satellite television company Yes and has now widened in other areas – continued to weigh on Bezeq group shares, worrying his bank creditors.
Bezeq stock ended down 1.1% on Sunday at 5.58 shekels ($1.57) while its parent company B Communications dropped another 2% to 57.70. Internet God, another group company, edged up 0.3% to 29.24, but in the weeks since the Israel Securities Authority probe first broke into the news, shares of Elovitch’s companies have fallen as much as 30%.
Eurocom, a privately held investment vehicle that controls Elovitch’s telecommunications companies and other holdings, owes several banks a debt of 1.1 billion shekels, and sources say they are getting increasingly nervous.
Eurocom has little or no cash on hand and the collapse of Bezeq and other shares has reduced the company’s net asset value (the worth of its assets minus its debt) to perhaps nil and certainly no more than 100 million shekels.
Sources said Eurocom executives, meeting with bankers, assured them that the decline in the market value of its holdings did not reflect their real value, adding that given 18 or so months, values would return to more realistic levels. That would enable Eurocom to pay down half of its debt – if not more – by selling assets.
The lenders, led by Israel Discount Bank, to which Eurocom owes 500 milion shekels, do not have very good options in front of them. They could ask Elovitch to inject capital into Eurocom, but it is not clear that he has that kind of money and he may need cash for his legal defense if the Israel Securities Authority probes ends in an indictment.
The banks could seize Eurocom, but they are likely to encounter stiff legal objections from the company, which isn’t legally insolvent. Moreover, taking control of a company in the midst of a crisis is problematic: By law, the banks are forbidden to control the business but must deposit the shares with a trustee, who will then try to sell them. But given Eurocom’s situation, the valuation will be lower than if they wait for the crisis to clear, if it does.