Alexander Granovsky faces Israel lawsuit over bank debt

Alexander Granovsky
Alexander Granovsky

Russian bank Alfa-Bank is demanding repayment of $15 million from Granovsky, who controls G. Willi-Food.

Is Alexander Granovsky, who only eighteen months ago was on the brink of acquiring control of Israel's largest holding company, IDB, facing legal proceedings over a debt of $15 million? Sources inform "Globes" that, in the next few days, Alfa-Bank, one of the largest banks operating in Eastern Europe, is expected to instigate legal proceedings against Granovsky over a debt from 2008. To this end, the bank has hired the services of Adv. Alon Pomeranc, head of the litigation department at the firm of Lipa Meir & Co.

Granovsky made headlines in Israel in the summer of 2013, when Nochi Dankner, at the time the controlling shareholder in IDB, was promoting a plan for investment in the concern, in the context of a debt settlement, through a consortium of investors. Granovsky headed the consortium alongside Dankner.

Granovsky's financial strength and financial profile were not revealed, then as now, but he was presented as a millionaire. Later, Granovsky bought control of food company G. Willi-Food Investments Ltd. (TASE:WLFD), but shortly afterwards, following the crisis that broke out in Ukraine, his businesses there got into cash flow difficulties, and he has lately been engaged in bringing partners into his businesses in Israel, Aharon Bloom and Moshe Potash.

Alfa-Bank is part of the Alfa Group, controlled by Russian Jewish billionaire Mikhail Fridman. The bank gave the loan in question to a construction company called Capital Construction, controlled by Granovsky, who signed a personal guarantee for it. The amount of the loan was 29 million Ukrainian hryvnia, equivalent to a few million dollars at then prevailing exchange rates. Together with interest and other expenses because of arrears, the loan amount has swelled to a current $15 million.

The crisis in Ukraine, which broke out a year ago when Russia invaded the Crimean peninsula and fomented a territorial conflict in eastern Ukraine, has indeed hurt the Ukrainian economy and most probably also had a negative effect on Granovsky's business activity there, but this does not appear to have been the main cause of his failure to repay the debt, because talks between him and the bank regarding it began about two years after the loan was given, that is, before the crisis in Ukraine began.

The legal proceeding expected in Israel follow proceedings in Ukraine. The reason for legal action in Israel is apparently that Alfa-Bank did not find substantial assets belonging to Granovsky in Ukraine, and realized that such assets are in Israel.

The timing of the opening of legal proceedings apparently arises from the bank's fear of progress in the deal whereby Granovsky is supposed to bring new partners into his "Israeli pyramid", which might be perceived as an attempt to dispose of assets and harm his ability to repay his debt. The date set for completing the deal is February 24, that is, tomorrow.

Granovsky controls BGI Investments (1961) Ltd. (TASE: BGI), which holds Emblaze (or, under its current name, BSD Crown), which controls food importer Willi-Food, its main asset. Granovsky has been promoting a deal whereby Bloom and Potash will invest $20 million in exchange for 50% of a new company to which Granovsky will transfer his private holdings in BGI (71%) and Emblaze (19%). The cash injected by Bloom and Potash is intended to help Granovsky repay BGI's debts to its bondholders, and private debts to Emblaze's previous owners, headed by Naftali Shani and the Fortissimo fund.

Granovsky bought the controlling stake in BGI in August 2012 from financier Zvi Barenboim for NIS 128 million, more than six times the current market value of the shares. At a bondholders meeting held near the time of the acquisition, the bondholders sought to find out who exactly the new owner of the company was, and what his plans were.

"We haven't come just for a day, but to set up a large company that in the end will have good assets and will generate profits," Granovsky promised them, "The profits are for charity, and so it's important for me that it should be done in the right way." On that occasion, the bondholders were informed that Rabbi Avraham Wolf, Chief Rabbi of Odessa, Granovksy's home town, would be appointed chairman of the company. BGI bond debt is currently NIS 74 million, and the bonds are traded at a yield of 6.4%. Half the debt, NIS 37 million, is repayable at the end of March this year.

As for Emblaze, Granovsky has for some time been delaying the last payment for the purchase of the company's shares, $11 million out of a total investment of $60 million (mostly with BGI's cash and the rest by him directly). Granovsky originally intended to use Emblaze to take over IDB (alongside Dankner), but in the end he bought Willi-Food, an investment on which Emblaze has so far made a loss on paper of about 60%.

BGI's only current activity is its holding in Emblaze, via which it holds Willi-Food, control of which was bought from brothers Yossi and Zvi Williger for NIS 285 million. Willi-Food's share price has dropped by more than 50% in the past year, to give a market cap of NIS 184 million, so that Emblaze's 60% stake is worth just NIS 113 million.

Published by Globes [online], Israel business news - - on February 23, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Alexander Granovsky
Alexander Granovsky
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