Sources inform ''Globes'' that worries about the debt of Europe Israel (MMS) Ltd., through which Mordechay Zisser controls Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT) may be the reason for a three-day slide in the latter's share price, which culminated yesterday in a 17.7% drop on the Tel Aviv Stock Exchange (TASE) to NIS 28.40, and a 25.1% drop on Nasdaq to $7.63, giving a market cap of $190 million. Elbit Imaging's TASE-listed bonds also fell by up to 12%, to complete a 16% three-day plunge.
Zisser delisted Europe Israel from the TASE through a share buyback in late 2004. The company owes Bank Hapoalim (TASE: POLI) NIS 985 million, which the bank categorizes as "problem debt".
It is important to note that Zisser reduced Europe Israel's debt principal by almost 10% during 2010. Interest payments were also made normally, including interest on arrears. But the sources say that Zisser missed repayment on the principal and Bank Hapoalim has taken legal action in response.
Zisser said in response, "All the figures mentioned are incorrect. I have no need to respond to figures about my private companies."
The origin of Europe Israel's debt was its acquisition of the controlling interest in Elbit Imaging from IDB Holding Corp. Ltd. (TASE:IDBH) holding company Elron Electronic Industries Ltd. (Pink Sheets: ELRNF; TASE: ELRN) in March 1999. Bank Hapoalim provided the bulk of the loan, and took Elbit Imaging shares as collateral. However, the share price has fallen 80% from its peak in October 2007, when the company's market cap reached NIS 5.9 billion.
Yesterday, Elbit Imaging announced that it will buyback up to NIS 150 million of its Series 1-6 bonds that are traded on the TASE, as well as up to NIS 150 million of TASE-listed bonds traded by its subsidiary Plaza Centers NV (LSE:PLAZWSE:WLZ). Elbit Imaging's bond debt totals NIS 2.6 billion.
Elbit Imaging owns and develops income-producing in Israel, Eastern Europe (through Plaza Centers), the US, and India. The company also has life sciences interests, a holdover from its previous incarnation, controlled through Elbit Medical Technologies Ltd. (TASE:EMTC).
Elbit Imaging posted a net profit of NIS 62 million in 2010, compared with a net loss of NIS 531 million in 2009. However, its liabilities totaled NIS 8.5 billion at the end of 2010, because of the nature of the company's real estate development activity, and its financing expenses totaled NIS 373 million.
In a statement to the TASE and Nasdaq this morning, Elbit Imaging said, "In response to recent reports in the Israeli media regarding an alleged disagreement between Bank Hapoalim and Elbit's controlling shareholders, Europe-Israel Ltd. and Mr. Mordechay Zisser, that this alleged disagreement has no connection with the long term loan agreement between Elbit and Bank Hapoalim, under which Elbit is in full satisfaction of its payment obligations. Elbit further wishes to clarify and emphasize that there has been no change in its business and operations that would explain the decline in the trading prices of its securities in recent days. Elbit intends to continue implementing its long-term business plan."
Elbit Imaging's share price rose 1.8% in early trading on the TASE today to NIS 28.90. Plaza Center's share opens at ₤1.09 in London today, giving a market cap of ₤315 million.
Published by Globes [online], Israel business news - www.globes-online.com - on May 24, 2011
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