Finance committee puts tycoons' debt under magnifying glass

The Knesset Finance Committee is meeting on Monday to discuss debt settlement solutions for two major Israeli companies that may not be able to make payments to their shareholders. Yitzhak Tshuva’s company Delek Real Estate Ltd. and Ilan Ben-Dov’s Tao Tsuot are both currently seeking debt restructuring to deal with worried shareholders.

Recently, a number of major Israeli tycoons such as Ben-Dov and Tshuva have tried to save their companies through debt restructuring. Their efforts have become a public concern because debt restructuring will likely need to come out of public savings, such as pension funds, provident funds, life insurance and mutual funds. These tycoons had previously distributed loans at almost zero interest rates to public institutions. They fought for the right to make these loans without mortgages, securities or financial considerations for the future and now, these mistakes have serious public implications. Thus the intervention of the Knesset Finance Committee.

“The behavior of tycoons such as Tshuva and Ben-Dov and their efforts to roll their debts over onto the public show that the efforts of those who save money are worthless,” said MK Zahava Gal-On (Meretz), who initiated the discussion in the Finance Committee.

“It is the state’s responsibility to stop the cynical conduct that allows the directors of public funds to be lackeys for wealthy tycoons at the expense of [regular money] savers’ interests,” Gal-On added.

MK Yitzhak Vaknin (Shas) also commented, saying that he intends to “call on the Capital Markets commissioner [Prof. Oded Sarig] and the chairman of the Israel Securities Authority [Prof. Shmuel Hauser] to take the necessary steps to prevent public institutions from continuing to do business with the wealthy who cannot meet their debt obligations.”

At the same time, the directors of Delek Real Estate Ltd. met well into the night to discuss possible solutions. Tshuva, the main stockholder, has gone to great lengths to meet all of his company's bond payments over the past three years, despite difficult circumstances. Globes business newspaper reports that capital market sources believe the company will seek to postpone its upcoming payment of NIS 2.1 billion, out of a total consolidated debt of NIS 15 billion.

It is already clear that the company will struggle to pay its debts because it hardly has any assets left to leverage. According to estimates reported in Globes, Tshuva will reportedly ask his company's Series 25 stockholders for a four-five month delay on the NIS 300 million payment due in September.

Delek Real Estate Ltd. has been struggling financially since 2008. At the outset of the crisis, Tshuva recruited Delek Group Ltd., which he also controls, and Delek Israel Fuel Corporation Ltd. to buy properties from Delek Real Estate. This solution was intended to prevent the real estate company from burdening the other companies in the group. Globes reports that Tshuva pursued every solution imaginable to service Delek Real Estate’s debt burden.

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