Isfar's Bank Debts Top NIS 400 Million

Sony goods importer squeezed by recession

Isfar, the Sony importers to Israel, and its technology subsidiary, Netcom, owe more than NIS 400 million to the banks, according to sources in the sector and close to the companies, which are owned by businessman Elon (Lonny) Herzikowitz.

Given the companies heavy debts and mounting losses in recent years, the banks have been keeping a close eye on their activities. Isfar has drafted a corporate recovery plan, although the sources do not believe there is any danger of the company collapsing.

A spokesman for the company denied that Isfar had prepared any recovery plan, and would not confirm the details of the company's debts.

Isfar sells premium goods of Sony and General Electric, and has suffered from the severe drop in this sector given the acute depression in the Israeli economy: Sales of electrical goods sector-wide have fallen 20-30 percent in the past year, and prices have dropped accordingly. Isfar has cut its Sony stores drastically, from seven outlets to only two in the past three months, although Herzikowitz has said that the company was primarily an importer and not retailer, and that the stores were, in essence, just fronts.

Herzikowitz has invested some NIS 60-70 million in Maccabi Tel Aviv soccer team, which sources say came from his personal finances.

In an effort to reverse the company's misfortunes, Isfar has taken to more aggressive marketing, particularly for its less expensive product ranges. The company's focus on the upper end of the market has taken a sharp knock in the past couple of years. In 2002, Isfar talked of launching a cheaper home brand, Isfar Home Tech. In October 2003, the company reintroduced Lenco as its own brand, after buying the name off the receiver.

Isfar Home Tech is still up and running, and Herzikowitz recently returned to take over the day-to-day running of the concern, after CEO Ilan Greenboim departed.

The banks do not expect there to be any sudden turnaround in the company's performance in the immediate future, and they will not be able to avoid making the necessary provisions for Isfar's debts. However, the sources remain confident, referring to Isfar as a strong company, with a well established, stable history, and with every potential to recover in line with the economy.