Mordechay Zisser is seeking a debt settlement with Bank Hapoalim (TASE: POLI) over the NIS 900 million debt owed by his private company Europe Israel MMS Ltd., through which he controls Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT). At his request, talks were opened with Bank Hapoalim CEO Zion Kenan and corporate division manager Shimon Gal over the rescheduling of the debt.
Zisser's opening position is to reschedule payments through 2022, after a two-year moratorium on the principle until 2014. He also does not want to pay extra interest because of the postponement, but he is willing to offer the bank 5% of Elbit Imaging.
Belying remarks by Zisser's aides, the talks are still only in the preliminary stage and a deal is far off. Sources believe that Bank Hapoalim rejects the offer as well as Zisser's effort to claim that a deal has been reached.
Banking sources believe that, due to Zisser's conduct in the past 18 months - during which he repeatedly violated agreements with Bank Hapoalim and missed deadlines - any rescheduling of the debt will be a tough sell, and will reflect the bank's lessons from his problematic conduct. An example of his conduct was the 12-month delay of a NIS 120 million payment, after missing repeated promises to pay with various excuses.
In principle, Bank Hapoalim is willing to reschedule Zisser's debt, but it expects to receive much higher interest on the arrears, and external guarantees to support the deal. The debt is currently secured by 47% of Elbit Imaging's shares, worth NIS 140 million. Other collateral held by the bank, including the hotels held through Beapart BV, have been sold at the bank's insistence, and helped him with the sale.
Under the current debt structure, Zisser is paying NIS 50 million a year, and will pay NIS 450 million at maturity. The current interest on the debt is a very low prime + 0.6%. Meanwhile, the yield on Elbit Imaging's bonds is 25-30%. After Zisser missed the debt payments, Bank Hapoalim reclassified the debt as "bad debt" and wrote off almost the full amount in its financial report for 2011.
Bank Hapoalim said in response, "The bank does not manage its negotiations with customers in the media."
Zisser declined to comment.
Published by Globes [online], Israel business news - www.globes-online.com - on April 10, 2012
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