Urbancorp may have misled Israeli investors

urbancorp
urbancorp

Allegations suggest the company's Canadian lenders provided loans to help inflate the balance sheet ahead of the bond offering.

The Urbancorp saga is sliding into criminal territory as sources informed "Globes" the company's Canadian lenders tried to help the real estate firm withdraw the funds raised in Israel while pretending to uphold the conditions of the prospectus.

The allegations revolve around a $12 million loan from a Canadian lender with an immediate withdrawal option - an atypical guarantee which should not count as part of a company's equity.

Furthermore, it was revealed Wednesday the Israel Securities Authority -- which will launch an official investigation into the offering and the company after the Passover holiday -- is expected to question the investment managers of public interests who purchased the bonds to examine their decision-making process.

The ISA is following the "Bramly precedent" -- the Rubicon Group affair where fund managers were questioned about their decision-making over an investment. By law, investment managers must conduct a series of checks before investing public funds.

The pension fund managers refused to participate in the Urbancorp offering while the mutual fund managers (in the same bodies) gorged on the bonds. The inconsistency will be examined by the ISA.

The regulator said in a statement: "The Israel Securities Authority does not comment on one specific piece of information or another. On the other hand, this is an exceptional case which entails an examination, and we are investigating the events."

An investigation of the relationship between the Canadian investors and Urbancorp will require an international effort as the case would necessitate the involvement of the Canadian authorities and the local courts.

The complex process is expected to carry significant costs to the taxpayers, though it appears the ISA -- despite warning the public of these types of offerings -- intends to make an example of Urbancorp.

Israel has $11 billion invested in securities of foreign firms and their guarantees are unsatisfactory; there will be much significance to how the ISA handles the affair.

Published by Globes [online], Israel business news - www.globes-online.com - on April 27, 2016

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

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