Three Tycoons Struggle to Stay Afloat in a Sea of Red / Elbit Imaging: Selling Assets but Failing to Calm Investors

One can venture that the investors on Ahad Ha'am Street would not have bet Elbit would face difficulties in servicing its debt.

If during the crisis of 2008 the investors on Ahad Ha'am Street had to bet which of the companies would face difficulties in servicing their debt over the coming years, one can venture that they would not have chosen Elbit Imaging.

At a time when many real estate companies, like Delek Real Estate and Africa-Israel Investments are wrestling with the mountains of debt that they have issued, the real estate and holding company, which is 48.5% controlled by Moti Zisser, has hit a crisis while it is cash-rich and debt-lean.

However, the investment of a billion shekels in shopping malls in India, to which one must add real estate investments in Eastern Europe, which the company made at the top-of-the-market in 2007-2008, as well as the investment of hundreds of millions of shekels in the fashion and medical sectors - all these brought down its stock market value in the ensuing years.

About a year ago the investors became aware of Zisser's troubles. Rumors began that Bank Hapoalim, the primary funder of Europe Israel - the private company by which Zisser controls Elbit Imaging -was not being repaid on schedule Investors were concerned that Zisser might make use of the public companies that he controls, Elbit and its subsidiary Plaza Centers, to pay its debts, at a time when the company's coffers are emptying.

In the past several months, Zisser has been trying to reassure the investors, primarily the debtholders.

To that end he has embarked on a sales campaign, most recently the sale of 47 shopping centers for NIS 1.4 billion. In addition, Zisser has come to agreements with debtholders about withdrawing dividends from the companies he controls, and he also restructured the debt to Hapoalim.

"Nothing happened in Elbit Imaging, and the company is not seeking anything from anyone," Zisser recently declared, hinting that he would not opt for a debt restructuring. In addition he emphasized that the company's success in the U.S. "will be replicated in India."

Despite Zisser's declarations, a real estate analyst in the capital market sounded less optimistic.

"Elbit depends on asset sales in order to survive the coming years," he said. " The company is stuck with land but with no funding, and that is currently its greatest source of risk. It all depends on the rate at which Zisser sells assets, and it is certainly feasible that he will also be forced to sell his malls in Eastern Europe."