All Is Far From Well at Rogosin Enterprises

Investec's request to appoint an official receiver for troubled Rogosin Enterprises was denied by Judge Varda Elshaich Monday, and a gag order was placed on the decision. Investec trustees called for the company to be placed in receivership after it failed to make the first payment to its bondholders last week.

In rejecting the request, the judge noted that despite her not finding cause to appoint a receiver for the company at the current time, there was indeed a fear of assets being taken from the company, and for that reason she approved accountant Pini Rivlin (Investec's proposed candidate for receiver) and representatives of the trustee bank to visit Rogosin's offices to register assets held in the name of the company.

The judge also instructed that after she had received responses from Rogosin and the official receiver, the Investec trustee (acting on behalf of the bondholders) will report fully on the matter within seven days.

In order to prevent any transfer of Rogosin's assets or of its bank accounts, a 24-hour gag order was placed on Monday's request for receivership. The gag order ended yesterday afternoon.

After the court decision Monday, Investec representatives hurried to Rogosin's offices, only to find them closed. Yesterday morning, no-one could be found, but by the afternoon, deputy CFO of Rogosin Avshalom Levy arrived to help them in their registration. Nevertheless, much of the necessary information was not available, being held by outside parties (such as accountants).

Changing fortunes

A lot has happened in the week since control of Rogosin passed from Ezra Harel to Yohai Schneider for $100,000. Many of the disgruntled bondholders have cast accusations at Harel's behavior, pointing out that Schneider, apparently a white knight of the company, in volunteering to "save" Rogosin's fortunes, is also a partner of Harel in the Nasdaq-listed ICTS. In the past four years, Rogosin has lost over NIS 100 million.

Investec has a number of unanswered questions on Rogosin's activities in the past. One concerns Rogosin's acquisition of a loss-making travel company, bought from a private concern controled by Harel. Investec also questions various activities that seemed far from lucrative. The trustee notes a sum of NIS 41 million that Rogosin lent to various parties in 2001. Of this, NIS 14.8 million was lent to another company controled by Harel.

Investec doubts Rogosin's current activities are of benefit to the bondholders. Investec pointed out the company still had large management expenses - NIS 9.6 million in 2001, and NIS 2.2 million in the first quarter of 2002 - and yet these sums could only have gone on managers' salaries, as Rogosin is a holding company with no activities of its own.