"The writing was on the wall: Habas HZ Investments Ltd. (TASE: HABS) problem did not start yesterday or the day before. I didn't understand how the bonds were trading at such low yields when all the company has is Nieuwe Steen Investments NV (NSI) (AEX:NISTI) shares," a senior institutional investor told "Globes," in the wake of Habas's announcement that it was in effect insolvent and asking its creditors for a debt settlement. The institutional investor added, "The prevailing assumption is that the Habas family has money but it was once thought that Nochi Dankner also had."
Hertzel Habas was until last week considered one of Israel's most sound businessmen. He and his family own 40% of the company's shares together with first class partners such as Israel Corporation (TASE: ILCO)controlling shareholders Idan Ofer and Udi Angel who own 23% of Habas.
It is not yet clear how much of his own money Habas can put into the debt settlement, and if he wants to put in anything at all. In 2005, the family sold their holdings in Ness Ziona's Kniyoter commercial center to Leo Noe for NIS 55 million, and in 2009 they sold their holdings in Kfar Saba's Arim mall to Amot Investments Ltd. (TASE:AMOT) for NIS 160 million. The family also owns land near in Glilot in the far north of Tel Aviv worth tens of millions of shekels.
Herzl Habas is the latest tycoon to seek a debt settlement despite their luxury homes and enormous wealth. He joins the ranks of Africa-Israel Investments Ltd. (TASE:AFIL) controlling shareholder Lev Leviev, Delek Group Ltd. (TASE: DLEKG) controlling shareholder Yitzhak Tshuva, Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT) controlling shareholder Motti Zisser, Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) controlling shareholder Yosef Maiman, Tao Tsuot Ltd. (TASE: TAO-M) controlling shareholder Ilan Ben-Dov, Scorpio Real Estate Ltd. (TASE: SCRP.B1) controlling shareholder Beny Steinmetz, and of course IDB Holding Corp. Ltd. (TASE:IDBH) controlling shareholder Nochi Dankner. Altogether, 8 tycoons with NIS 16 billion debt.
Habas HZ Investments is the public arm of the family's activities, which has built some impressive projects including the two Yoo apartment towers and 1 Rothschild, which sold the highest quality luxury apartments at a time when Israel's real estate market was rising strongly. Consequently, the sudden collapse of the company has surprised many investors who were not aware of the company's huge exposure in its 21% stake of the Dutch REIT fund NSI, which has lost "on paper" NIS 500 million and threatens to bring down the company.
A man of honor and his word
Habas's bond debt amounts to NIS 450 million. In two months, the company needs to repay NIS 63 million to its Series I2 bondholders and it must repay a further NIS 65 million to its Series 4 bondholders in August. The firm's bondholders are due to meet today to discuss ways to protect their rights.
Businesspeople that were asked to talk about Habas kept repeating the word "honor," which is something very important to him and were thus amazed by the situation in which he finds himself. "It's not like Habas and his behavior surprises me. He always stood by his word and I hope he will do so again now," one businessman in financial sector said.
Another businessman in the real estate sector told "Globes," "There have been so many debt settlements in Israel that it has given the country a bad name. I don't understand this forgiveness towards the haircuts that are being done here."
Habas's board of directors includes former Israel Air Force commander General (res.) Eitan Ben-Eliahu and Maccabi Tel Aviv basketball club chairman Adv. Shimon Mizrahi while the Ofer family representative Yossi Rozen recently resigned.
Habas has set very high standards in construction and design partnering with the world's very best architects like Philippe Starck.
Regarding Habas Investments financial situation its controlling shareholder recently said, "The company can easily service its commitments. There is no commitment that the company sees a problem in meeting in the coming years. And that's under conservative working assumptions. From our point of view servicing commitments is as vital as looking for opportunities and earning money."
Published by Globes [online], Israel business news - www.globes-online.com - on March 14, 2013
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