Eliezer Fishman has offered creditors a debt arrangement in which he will pay less than NIS 90 million of his NIS 1.75 billion debt - a 95% "haircut". Fishman filed his proposal for a creditors' arrangement to the Municipal Court yesterday.
Last September, at a court hearing on Fishman's receivership, it was decided that Fishman would be provided with the option to submit an arrangement outline to the court by next Monday (December 12). In a bankruptcy procedure, Fishman's creditors (banks and Israel Tax Authority income and property tax commission) will receive Fishman's assets not held in lien, estimated in the past at NIS 50-70 million.
In an attempt to convince creditors to prefer a debt arrangement to bankruptcy, Fishman proposes, other than these assets, three further sources for debt repayment - totaling NIS 18 million - which will not be accessible to creditors in a bankruptcy process.
The first source is NIS 10 million from the sale of half of a plot in Hadera (as part of an agreement in which Fishman provided Excellence Investments Ltd. (TASE: EXCE) with securities), NIS 4 million from return of a shareholders' loan provided to Oneal Construction and NIS 4 million from the sale of Fishman's home in Savyon, which will be realized in four years. The home in Savyon has been registered under the name of Fishman's wife, Tova Fishman, for over 20 years, which, in principle, makes foreclosure as part of a bankruptcy process impossible. Fishman proposes to sell the home, estimated at over NIS 25 million, and use some of the sum to repay his creditors.
Fishman also proposes a similar mechanism to the one included in Nochi Dankner's debt arrangement, signed with the banks six months ago, in which Fishman will provide creditors with 50% of his revenue in the next six years.
The write-off of debt to creditors is not determined in advance, but Fishman's attorneys, Adv. Shalom Goldblatt and Adv. Ehud Gindes, say themselves, in the submitted document that "Fishman is 74 years old and is not a healthy person…but he still continues working and strives to reduce his debts," a condition which put Fishman's capability to generate a substantial revenue in doubt.
The outline also proposes the sale of the rest of Fishman's assets which are not under lien. This refers to cash and holdings in companies not under lien to other creditors. This also refers to the sale of owned real estate: a property in Hissin St. in Tel Aviv; 50% of a property in Ramat Ilan; 50% of an apartment in Berlin; and a 287 square meter plot in Netanya. In the past, these assets have been estimated at NIS 70 million.
Fishman's debts to the banking system are estimated at NIS 4.5 billion. 80% of the debt is to Bank Hapoalim (TASE: POLI) and Bank Leumi (TASE: LUMI) (a NIS 1.8 billion debt to each bank); however, the receivership process has been initiated by the Tax Authority, which demanded a repayment of a NIS 196 million debt from the sale of holdings in 2006. All funds from the sale were used to repay debts, but the Tax Authority has asked to collect tax from the sale process. The court has approved the repayment of debt to the Tax Authority, after a rejected appeal by Fishman. In the documents detailing the debt arrangement outline, Fishman also reveals correspondence between his attorneys and the Tax Authority, from the period in which the outline was formed, in which Fishman is subjected to severe criticism.
The banks have joined the Tax Authority, after it had initiated the bankruptcy process. After excluding the debt against which Fishman's companies are in lien to the banks, the volume of Fishman's direct debt and personal guarantees to creditors is NIS 1.75 billion. This outline proposes a repayment estimated at less than NIS 90 million.
In a document filed by Fishman's lawyers to the court, they explain why the arrangement should be approved, although it reflects a debt repayment which is significantly lower than the overall debt. First of all, they say that Fishman is an honest person who encountered difficulties and that he did not pursue any dishonest action that resulted in this situation. "Relations between Fishman and the banks have always been based on respect, full transparency and cooperation, while providing full disclosure regarding his business. Over the years, no improper conduct or concealment of assets has been attributed to Fishman. On the contrary, during crises Fishman claimed responsibility, injected funds, provided guarantees and securities for the strengthening and enhancement of the companies. His debt is a result of personal guarantees given against the debt of the group's companies," they write.
The attorneys further say that an arrangement will help prevent a deterioration of the situation in companies controlled by Fishman. "In a theoretical world, the independent operation of controlled companies is not supposed to be affected by Fishman's conduct, but in a business reality these things have implications and a direct negative effect. This creditors' arrangement is aimed at addressing this weakness, in preventing damage to the operation of controlled companies and acting to maintain their stability.
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2016
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