Heftsiba Group on Sunday asked a Jerusalem court for protection from creditors as bondholders and at least one bank sought to recover debt that may amount to NIS 1.6 billion.
BOAZ YONA was fired as Heftsiba Jerusalem CEO yesterday.
Photo: Ariel Jerozolimski
The petition asked the Jerusalem District Court to appoint a temporary trustee to undertake a recovery plan, according to a copy of the document, which was filed in the name of four units of the group and controlling shareholder Mordechai Yona.
The group, which includes three companies traded on the Tel Aviv Stock Exchange, can no longer conduct operations following the "severe deterioration of the past few days," the petition said.
The group has about NIS 1.6b. in debt, half of it owned to banks, including Bank Hapoalim Ltd. and Bank Leumi, the two biggest, the petition said. It said the group had about 4,000 housing units under construction, of which 2,600 were already sold.
Meanwhile, a group of bondholders asked the Tel Aviv District Court to issue a restraining order against Heftsiba Jerusalem Gold, the company told the stock exchange. Heftsiba Jerusalem said it fired its chief executive officer, Boaz Yona, Mordechai Yona's son, and suspended operations.
Hapoalim filed a petition with the Jerusalem District Court, to foreclose on five projects being developing by Heftsiba. Hapoalim asked the court to appoint a receiver to oversee completion of construction and the sale of the apartments, Hapoalim said.
"Heftsiba's financial troubles seem to be a result of an obvious cash shortage," said Yuval Ben Zeev, an analyst at Clal Finance Batucha. "Also, there seems to be an element of possible fraud involved, as the company said that profits from their projects were much higher than they really were. But, I am not sure what the trigger was - they stopped delivering goods and couldn't complete projects, and then it was only a matter of time before their lender backed out."
The stock exchange, which suspended trading last week, released a statement on Sunday saying that if the company does not put its financial house in order by the time the exchange's directors meet on August 15, a decision will be made regarding the future of the company's presence on the exchange.
Heftsiba had been in the process of constructing some 4,000 apartments when rumors of its impending bankruptcy sparked a surge of panic on Thursday.
"The appointment of the receiver will ensure that these apartments are completed and the owners are given what they have rightfully paid for," said Hapoalim.
Mizrahi-Tefahot Bank said it received approval to appoint a receiver in order to seize four projects of Heftsiba.
While there had been rumors for weeks that Heftsiba was in trouble, concern escalated dramatically late last week when it was learned that Electra Real Estate had pulled out of two business deals that would have given it a 90 percent stake in Heftsiba.
"The reason Electra pulled out of the deal is that they discovered new evidence that had not been disclosed earlier," Ben Zeev told The Jerusalem Post. "Heftsiba's level of debt is much more then Electra originally knew about. I don't think they will be able to make a comeback," he said.
He doesn't believe, however, ordeal will have a negative impact on the banks.
"They have sufficient collateral to enable them to cut their losses. Bank Hapoalim, for example, has a total loan portfolio of some NIS 200 billion - so these losses ... are nothing for Hapoalim."
While the fall of Heftsiba wasn't expected to have much of impact on the country's overall real estate market, Ben Zeev believes it will hurt smaller construction businesses.
"I think that smaller companies will face difficulties in raising bonds at lower prices, but other than that, I don't see any other impact," he said.
Dani Fishman, the joint chief executive officer of Tamir Fishman & Co. agreed. "The residential real estate market in Israel is in good shape and so are most of the companies," Fishman, whose firm oversees $5b. in investments, said in a note. "This is a crisis of a specific company and not of a sector."•
