Deep Pockets, Deep Debt

Some of the deepest pockets in Israel are also in the deepest debt.

A Globes survey of the highest income tiers revealed that eight Israeli tycoons are struggling with a collective 16 billion shekels of debt.

“The writing was on the wall: Habas HZ Investments’ 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 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 also noted, “The prevailing assumption is that the Habas family has money, but it was once thought that Nochi Dankner also had,” referring to the ultra-rich financier who is now busy trying to finance his debts.

The Habas disclosure comes as a shock. Hertzel Habas has been considered one of Israel’s soundest businessmen. He and his family own 40% of the company’s shares, together with first- class partners such as Israel Corporation controlling shareholders Idan Ofer and Udi Angel, who own 23% of Habas.

Dankner and Habas have plenty of high-rent debtors to keep them company, it turns out.

They join Africa-Israel Investments’ controlling shareholder Lev Leviev, Delek Group  controlling shareholder Yitzchak Teshuva, Elbit Imaging controlling shareholder Motti Zisser, Ampal-American Israel Corporation controlling shareholder Yosef Maiman, Tao Tsuot controlling shareholder Ilan Ben-Dov, and Scorpio Real Estate controlling shareholder Beny Steinmetz.

Habas HZ Investments is the public arm of the family’s activities, which has built 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. So, the company’s sudden plunge has stunned investors who were in the dark regarding its huge exposure in a 21% stake of the Dutch REIT fund NSI, which has lost “on paper” 500 million shekels and threatens to bring down the company.

Habas’s bond debt amounts to 450 million shekels. In two months, the company needs to repay 63 million to its Series I2 bondholders and it must repay another 65 million to its Series 4 bondholders in August. The firm’s bondholders are due to meet today to discuss ways to protect themselves.

Habas has a sterling reputation for integrity, which is generating hope during this dark chapter of his career. “He always stood by his word and I hope he will do so again now,” one businessman in the financial sector said.

Another businessman in the real estate sector bemoaned the proliferation of big debtors.

“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,” he said.

This article appeared in print on page 6 of the March 19th, 2013 edition of Hamodia.