A storm has erupted over negotiations on a debt settlement between Ganden Investments Ltd., through which Nochi Dankner controls IDB Holding Corp. Ltd. (TASE:IDBH), and Bank Leumi (TASE: LUMI), under which the bank will write-off NIS 150 million of Ganden's debt. “IDF Radio" (Galei Zahal) reports that Minister of Finance Yair Lapid has asked Supervisor of Banks David Zaken to review the pending agreement, and that the banks' directors are defending it. One source in the Bank of Israel said that Zaken would investigate the matter.
"Nochi Dankner is not a debtor of the bank. We're talking about a company," Bank Leumi director Prof. Yedidia Stern told "IDF Radio". "It's necessary to do everything possible not to placate public opinion, this or that MK, or the bank's debtors, but to satisfy the bank."
Stern added, "I am very pleased that Dankner will put his hand into the pocket of another company he owns and repay the debt, but we live in a world of laws and the contract is not with the man, but with the company. There are cases, and we may discover that this is one of them, in which the court rules that the man and the company are one and the same and requires him to pay."
Stern said that Bank Leumi cannot make profits without taking risks. "When the bank extended credit to these companies many years ago, it gave the credit on the basis of guarantees, which at the last stage were worth four times more than the debt. It was very reasonable to grant such credit. If we don’t extend credit, we won't profit, and in the rules of risk-taking, you sometimes lose. This is a case in which we all lost."
Bank Leumi told "IDF Radio" in response, "Due to banking confidentiality, we cannot disclose information about specific customers. Bank Leumi has taken, takes, and will continue to take the means available to it to collect every debt."
Labor Party chairwoman MK Shelly Yachimovich called on Zaken to intervene and halt the talks on a debt settlement, which she called "a dangerous precedent of irresponsible credit policy." She added, "If the banks forego these debts, it is liable to affect their financial stability."
Yachimovich also noted that the centralization among auditors, about which she has warned Zaken several times, is linked to Bank Leumi CEO Rakefet Russak-Aminoach's decision and the involvement of accountant Gad Somech in it. "Gad Somech is both the auditor of IDB and Bank Leumi, as well as most of the other banks to which the company owes money. This prevents him from properly auditing the potential financial and stability risks in decisions by Bank Leumi's CEO with regard to writing off the debts of customers he audits."
Ganden owes Bank Leumi NIS 450 million, and is in advanced talks on a settlement that includes writing off a third of the amount. IDB also owes the bank NIS 100 million for which there is an agreement on settlement at the same terms as the company's proposed settlement with its bondholders. Ganden owes NIS 80 million to Mizrahi Tefahot Bank (TASE:MZTF), which wants proof that Eduardo Elsztain will inject capital before agreeing to a settlement. IDB Holding has a solo bond debt of NIS 1.8 billion, for which it has proposed a settlement, subject to a capital injection by Elsztain, that includes a 50% write-off. IDB Holding's wholly-owned subsidiary IDB Development Corporation has a bond debt of NIS 4.1 billion on which there are no talks, but some bondholders are seeking to impose a settlement.
Published by Globes [online], Israel business news - www.globes-online.com - on April 17, 2013
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