Iscal Tots Up NIS182M Debt, Votes Today on Creditors' Deal

The devastation thrust onto a group of companies headed by former police chief Rafi Peled and Aryeh Givony can still be heard reverberating around boardrooms. Yesterday, the scope of the damage shone through in a report submitted by the trustee managers of Iscal (TASE: ISCL), Shlomo Ness and Ado Braunstein, to the Tel Aviv Stock Exchange. Their 15-page report assessed that Iscal's debts amounted to NIS 182.6 million.

Iscal's number one creditor is Feuchtwanger Investments, the controling shareholder of the firm. In total, Iscal's unsecured creditors, led by Feuchtwanger and Atarei Sharon, a company owned by tycoon Yitzhak Tshuva, are owed NIS 145.4 million, while secured debtors are owed a further NIS 37 million.

The secured creditors include Bank Leumi (secured debt of NIS 20 million) and a portion of the Atarei Sharon debt. They will continue to manage the company while looking for buyers for Iscal's Formula holdings. Other secured creditors include Bank Hapoalim, which is owed NIS 8.7 million, but has a lien on a specific Iscal property and also stands to get all its money back.

The trustees propose to sell Iscal's holdings in various companies, other than its main asset - a 7.7 percent share in Formula Systems (Nasdaq:FORTY, TASE: FORT), a group of software companies.

The problem with the Formula stake is its price. When it controlled Iscal, the Peled-Givony group had it buy the Formula shares for NIS 120 each, but they now trade at around only NIS 40 per share, valuing Iscal's 7.7 percent stake at around NIS 32 million.

Computer Direct has bid to buy Iscal's Formula stake at 10 percent premium over its market price, but Iscal's creditors feel a better price could be obtained.

Other than Atarei Sharon and Feuchtwanger, Iscal has a string of unsecured creditors, mainly service providers - lawyers, restaurants, accountants and so on.

One law office alone is owed almost a million shekels. Other such debts range from half a million shekels to NIS 1,346. Altogether, Iscal owes lawyers NIS 1.8 million.

Kesselman & Kesselman PwC is owed NIS 630,000, and other accountants are owed another NIS 250,000.

None stands to get its money in full; they will apparently be getting around 20 percent of their outstanding bills, according to the draft arrangement.

The trustees propose that they hold out on selling the Formula stocks, while examining alternatives. However, there is a limit to how long the court protection from creditors can be extended, and this may be the deciding factor.

One alternative allows the trustees to continue running the show for 18 months or until an acceptable buyer is found for the Formula shares. The trustees warned that should they choose to liquidate the company, they were likely to see very little of their money.

Iscal's general assembly of shareholders is scheduled to vote on the proposed creditors' arrangement today.