Mizrahi Tefahot Bank (TASE:MZTF), which represents the creditors of Eurocom Real Estate, today contacted its debtor and Eurocom Communications, Eurocom Real Estate's fellow subsidiary, both controlled by Shaul Elovitch. The consortium of institutions led by Mizrahi Tefahot includes Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), Altshuler Shaham Ltd., Psagot Investment House Ltd., and Menorah Mivtachim Holdings Ltd. (TASE: MORA). The bank told the Elovitch companies, "The situation is disturbing," and that it was concerned about the future of the NIS 264 million debt that Eurocom Real Estate owed to the consortium.
In late 2014, Mizrahi Tefahot and Eurocom Real Estate signed a NIS 790 refinancing agreement. The outstanding debt currently amounts to NIS 264 million, and the main collateral for it is land in Beit Dagan, Spacecom Satellite Communications Ltd. (TASE:SCC) shares, surpluses from the Midtown project worth an estimated NIS 560 million, and a guarantee from Eurocom Communications. Mizrahi Tefahot is now claiming that the borrower has breached its duty "to meet the financial criteria for its credit-collateral ratio." If the violation is not corrected, the creditor will be entitled to demand immediate payment of the debt, and to foreclose the collateral.
Mizrahi Tefahot also says, "The debt arrangement and rescheduling carried out by Eurocom Communications in itself constitutes a breach of the financing agreement," given what it calls "a disturbing state of affairs in which Eurocom Communications is conducting negotiations for a settlement with its creditors, thereby detracting from the value of the collateral and possibly jeopardizing the lenders' ability to collect their debt." The bank alleges that this could have "a material negative impact" on the value of the guarantee provided by Eurocom Communications to secure the debt of Eurocom Real Estate. Mizrahi Tefahot says that for this reason, "Eurocom is not permitted or entitled to give any of its creditors preference," and "is not entitled to provide additional collateral for some of its creditors, while ignoring its duty to the lenders to Eurocom Real Estate."
Sources associated with Eurocom stated, "The debt is excellent, with a very low loan-to-value (LTV) ratio. We are in constant and businesslike contact with the creditors and have excellent relations with them, and are confident that things will turn out all right."
Published by Globes [online], Israel Business News - www.globes-online.com - on August 31, 2017
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