The Nawi Brothers Group, a non-banking financing company, is rejecting allegations by the Bank of Israel in a letter sent to the company stating that its bond issue last week "contravenes the purpose of the Banking (Licensing) Law." The Israel Securities Authority, which is responsible for supervising trading in the issued bonds, is also taking issue with the Bank of Israel's position, and has announced that it does not intend to bar trading in these bonds.
Nawi Brothers law week raised NIS 300 million in its issue of Series B bonds. A day after the public tender for the issue was completed, the Bank of Israel legal advisor sent a letter asserting, "The issue contravenes the purpose of the Banking (Licensing) Law." Nawi Brothers yesterday stated that it "rejects the conclusion by the Bank of Israel legal advisor. The company obtained all the authorizations and permits required for the issue under any law, and did not violate the Banking Law."
The Bank of Israel explained, "The Banking Law states, among other things, that an offering of securities requiring a prospectus for offering credit also requires a license from the Governor of the Bank of Israel. In November 2015, the Knesset enacted an amendment to this law allowing an entity providing credit issue to issue bonds (debt certificates) up to a NIS 2.5 billion ceiling under certain conditions. One of these conditions contains a clause stating that the proceeds from the issue must be used to provide credit to individuals or corporations whose annual revenue during the year preceding the date on which the credit was provided did not exceed NIS 400 million.
"The Nawi Brothers Group sought to make such an issue, and since it appears that its customers include those whose annual revenue exceeded the amount stated in the amendment, it contacted the Bank of Israel and presented a number of formats that would enable it to comply with the provisions of the law. In its response, the Bank of Israel drew the company's attention to various problems in the formats presented that were inconsistent with the purposes of the amendment, and asked the company to address this question." The Bank of Israel also said today, "For the purpose of the restriction on the amount of the borrowers' revenue (up to NIS 400 million a year), the legislator can, of course, change this restriction, should it choose to do so."
Nawi Brothers co-owner and CEO Dori Nawi commented on the issue today, saying, "The bonds were registered, and trading in them will begin tomorrow at the latest. Out of respect for the Bank of Israel, we will not discuss the letter it wrote."
He added that his company "was compliant with the provisions of the law, and was acting in accordance with it. We do not know why the Bank of Israel is involving us in its conflicts with the Ministry of Finance. We have carried out our duty, particularly after the law was amended and put in order a year ago." Nawi went on to ask, "What is the point of the letter after the issue has already taken place? We were in the process of the issue for a long time, and it was published and not concealed. Only after the issue was completed and the public stage was over did they write a letter."
Concerning the response from the company required by the Bank of Israel, Dori Nawi said, "The Bank of Israel will receive a suitable letter in response. Our letter will refute each of the Bank of Israel's allegations, but let there be no mistake - our regulator is the Securities Authority. We are not a bank, and are not subject to Bank of Israel supervision."
Concerning the issue itself, Nawi stated, "We carried out the issue in order to improve our rating to A. S&P Maalot wrote that if we diversify our sources of financing and credit, they would raise our rating and when that happens, we will be able to cut our financing costs dramatically, compared with the cost of financing through bonds and the banks. We will then be able to provide real competition for the banks."
Most of the activity by Nawi Brothers, controlled by Shaul and Dori Nawi, consists of check discounting, in which the company's customers receive the monetary value of their postdated checks they have received, which are assigned to the company for a percentage commission.
Published by Globes [online], Israel business news - www.globes-online.com - on February 22, 2016
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