Receivership order against diamond dealer Schwartz

Uri Schwartz

Former Israel Diamond Manufacturers Association President Uri Schwartz is on the way to bankruptcy.

Former Israel Diamond Manufacturers Association President Uri Schwartz, one of Israel's most veteran and well-known diamond dealers, is on the way to bankruptcy. A receivership order for his assets was issued last week because of an NIS 8 million unpaid debt. Bank Leumi (TASE: LUMI) intends to foreclose Schwartz's home in the Sea and Sun project in Tel Aviv and to seize other assets, including an apartment on Ben Yehuda St. in Tel Aviv.

In a meeting with senior bank officials, Schwartz's lawyer was quoted as saying, "Uri has given up." His debts are estimated at NIS 78.2 million, before a debt arrangement. According to the bank, diamond dealer and Israel Diamond Institute chairman Moti Ganz guaranteed Schwartz's NIS 8 million debt to the bank, although Ganz is asserting that his guarantee is no longer valid.

"In volume of activity, Schwartz was not one of the biggest diamond dealers, although he was considered not such a small dealer," a diamond industry source said. "For the public, you could say that Schwartz was an important figure, prominent, and respected."

A bankrupt sector

Schwartz, 67, began his diamond dealing career 45 years ago in the Schwartz Diamonds company, which he inherited from his father in the 1970s. The company had 250 employees at its peak. At the same time, for years Schwartz was a recognized public figure at the Ramat Gan Diamond Exchange, and even ran for chairman of the Diamond Exchange. He served three terms as president of the Diamond Manufacturers Association.

The company's business began to decline in recent years, following the general crisis in the diamond sector. The global economic crisis had a negative impact on diamonds sales, and a credit crunch afflicted many diamond dealers as a result of declining sales. Additional factors included the difficulty in competing with synthetic diamonds of ever-improving quality and changes in work rules decreed by the De Beers raw diamond monopoly. Schwartz formerly held a Sightholder license as a marketer for De Beers, a special status enjoyed by only 80 diamond dealer in the world.

The petition filed by Bank Leumi through the Levinbook law firm stated, "To the best of the bank's knowledge, the activity of Schwartz Diamonds was based on marketing diamonds to overseas customers, usually from far eastern countries and the US. The company had related overseas companies used for marketing and sales." It was also stated that Schwartz himself had guaranteed repayment of all the company's debts to the bank, as had Ganz. Sources close to Ganz, however, quoted him as saying that his guarantee had expired.

Schwartz's plea in response to the bank's petition, which he filed through Adv. Avichay Vardi, stated that he had been forced to discontinue the company's activity, after injecting $13.5 million into the company in owner's loans.

In recent months. Schwartz negotiated with his various creditors, and concluded a settlement with both his creditors on the Diamond Exchange and Israel Discount Bank (TASE: DSCT), the largest creditor. Schwartz stated that under his arrangement with Discount Bank, he would repay only 12.5% of his NIS 49 million debt. Schwartz had previously told Bank Leumi, "Discount Bank allowed me to keep NIS 800,000 for living expenses." This quote came from the minutes of a meeting last May, which Bank Leumi attached to its bankruptcy petition.

"I am in the situation of counting my last crumbs. I cannot give any more than what I have," Schwartz was quoted as saying in the minutes of that meeting. The same document stated, "Uri currently lives in an apartment in Sea and Sun in Tel Aviv - a 120-sq.m. apartment on the fourth floor of terraced buildings with a sea view." The same document went on to say, "It was stated that the bank cannot accept a situation in which a customer in such a state lives in such a prestigious project."

In response to the bankruptcy petition, Schwartz listed his debts: NIS 49 million to Discount Bank (before the debt arrangement, which the bank asserts was later violated); NIS 8.2 million to Union Bank of Israel (TASE: UNON) (also among the creditors secured through Schwartz's apartments); various suppliers on the Diamond Exchange (with whom he reached an arrangement); NIS 2 million to his daughter; NIS 1 million to his son, Enav Schwartz; and NIS 1 million to Keren Or Diamonds, whose shareholders are members of Schwartz's family.

Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Uri Schwartz
Uri Schwartz
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