Bank Hapoalim (TASE: POLI) intends to put up the shares of Mordechay (Motti) Zisser in Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT) into receivership. The bank has a lien on the shares, and if it goes ahead with the move, this will frustrate Elbit Imaging's efforts to reach a debt settlement with its bondholders, led by foreign funds York Capital Management and DK Partners.
Bank Hapoalim also intends to foreclose the personal guarantee Zisser provided against the debt of Elbit Imaging's parent company Europe-Israel (MMS) Ltd., which owes the bank NIS 1 billion.
Bank Hapoalim declined to comment on the report.
Zisser owns 53% of Elbit Imaging, and most of his shares are attached to Bank Hapoalim. The shares' current value is just NIS 80 million.
In July 2012, Zisser reached a debt settlement with Bank Hapoalim. His bank debt is in arrears, and the bank classifies it as "bad debt". The bank has written off a substantial part of the debt as losses in its financial statements. Under the terms of the debt settlement between the parties, Europe-Israel's payments on the principal were postponed by two years, and will be paid in 2013-21 (NIS 50 million a year, and a final NIS 450 million at the end of the period).
Bank Hapoalim also has an option on 7.5% of Elbit Imaging's shares, which can be exercised in 2016-18 at NIS 3-9 per share. The bank also obtained several collaterals and liens on Europe-Israel's projects around the world.
Elbit Imaging's debt settlement proposal includes converting most of the bond debt (which has an adjusted value of NIS 2.2 billion) into equity, with no capital injection by Zisser, who will stay on as the company's president and CEO. The proposed settlement involved a write-off of more than NIS 1 billion on the adjusted debt.
Elbit Imaging's initial settlement proposal was made to York Capital and DK Partners, which so far as is known own NIS 1 billion par value of Elbit Imaging's bonds (about half the debt). If the proposal is accepted, the two equity funds will acquire control of the company. Zisser's stake will fall from the current 53% to 15-20%, and he will receive an option to increase his stake if the company's shape improves.
Elbit Imaging is a real estate developer, mostly in Eastern Europe and India (through subsidiary Plaza Centers NV (LSE:PLAZWSE:WLZ)), and has life sciences interests through subsidiary Elbit Medical Technologies Ltd. (TASE:EMTC).
Elbit Imaging suffers from a severe cash flow problem, and it cannot meet its payments to its creditors on time. According to the sources and uses statement published in January, the company is due to pay its creditors NIS 732 million this year, but has only NIS 116 million in cash. In addition to the bond debt, the company owes NIS 300 million to the big banks: NIS 240 million to Bank Hapoalim, and NIS 60 million to Bank Leumi (TASE: LUMI).
Published by Globes [online], Israel business news - www.globes-online.com - on February 12, 2013
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