“Experience proves that the best way to collect debts from troubled companies is to rehabilitate them and improve their financial standing by generating a positive cash flow, and not to foreclose liens and assets,” said Bank Leumi deputy CEO Dr. Ehud Shapira today. Shapira was speaking at a “Globes Initiative” conference on company rehabilitation.
Shapira said Bank Leumi was prepared to help companies recover on the condition that all the parties involved, the owners, banks, other creditors, and the company itself, provide practical aid. “The non-cooperation by any of these groups is liable to torpedo help given by the bank, thereby preventing the company’s recovery,” he said.
Shapira added that in cases in which the bank provides additional financing, despite the risk, the bank should be entitled to an additional profit in the event that the company recovers, such as company options. Shapira noted that the use this tool was not sufficiently widespread.
Shapira summarized the optimal ways for the bank to maximize debt repayments, while minimizing the damage to the parties involved.
He said decision-making under conditions of uncertainty about a financially troubled company should be based on rational analysis and reasonable risk-taking.
Published by Globes [online] - www.globes.co.il - on February 11, 2003