Leumi suspends debt deal with Dankner
Following public outcry and Bank of Israel probe, Israel's second biggest bank defers NIS 150 million debt forgiveness deal with company owned by tycoon
The debt write-off deal of one-third of the total owed by Ganden was also criticized by politicians and the Knesset's Finance committee is to discuss such debt agreements by Israeli banks next week.
The public and investors have been outraged at a growing number of companies - some of which are owned by Israel's richest businessmen - looking to delay or reduce loan repayments.
Analysts estimate that some NIS 40 billion ($11 billion) in corporate debt needs to be restructured in the coming years as a result of the global economic downturn.
The Finance Ministry asked the Bank of Israel's banking regulator to examine the deal with Dankner, a private company through which Dankner controls heavily-indebted conglomerate IDB Holding Corp.
The IDB group, which has assets of $30 billion, controls Cellcom, Israel's leading mobile phone operator, supermarket chain Super-Sol and Clal Insurance . Its subsidiary Koor Industries owns a 2.4% stake in Credit Suisse.
A Bank of Israel spokesman said its examination aimed to make sure Bank Leumi had acted properly when granting and managing credit and, when necessary, formulating debt arrangements. This would include assessing whether bank officers and board members were acting in the best interests of the bank, its depositors and shareholders.
Leumi, the country's second biggest bank, said: "In the light of the announcement that the supervisor of banks is examining the matter, the bank has decided to suspend treatment of the outline debt arrangement for the company until the examination is complete."
Leumi also said it believed the outline of the debt arrangement for Ganden, approved by the bank's board several months ago, was the best solution. It said the deal had not yet been signed. The Israeli government is Bank Leumi's biggest shareholder with a 6% stake, which is administered by the Finance Ministry.
A Ganden spokesman said the company was "holding talks with its bank creditors to reach a debt arrangement whose principles are identical to hundreds of previous arrangements signed in the business sector in Israel and accepted in all western countries."
In March, IDB, which has debt of NIS 2.06 billion ($570 million), agreed on a settlement in principle with a representative of its bondholders.
