Rimonim Hotels and Resorts Ltd. has filed a NIS 233.5 million lawsuit against Isrotel Ltd. (TASE: ISRO) for breach of contract signed in 1999 for the operation of the Rimonim Hotel on Jaffa Street in Jerusalem. Rimonim began operating the hotel in April 2000 on the basis of a 25-year lease.
The family that owns Rimonim has declared bankruptcy.
Isrotel also extended Rimonim a loan allow Rimonim to repay its debt to Israel Land Development Company (TASE: ILDC) under and agreement to build the hotel, which was never implemented.
Isrotel agreed to lease the hotel for 25 years with an option to buy, which would ensure rental income that would enable Rimonim to repay to debt to First International Bank of Israel (TASE: FTIN1;FTIN5) for a loan taken to buy the rights to the hotel and to Isrotel for the loan it gave Rimonim. Under the agreement, after Rimonim repaid these debts, it was to keep additional profits from rental income and the rights to the hotel itself at the end of the lease.
The suit charges that, in 2001, Isrotel unilaterally decided to close the hotel and fire its staff. It also claims that Isrotel never paid any rent to Rimonim.
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2008
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