Digal Bondholders Give Preliminary Nod to Jewish Bid

Digal Investments and Holdings Ltd. bondholders agreed in principle to accept an offer by Jewish investors for control of an east Jerusalem housing project and reject a Palestinian bid, pending a final vote.

The Jewish group, led by Rami Levi, chief executive of an Israeli supermarket chain and Jerusalem City Council member, beat Palestinian-American investor Bashar Masri’s bid for Digal and its Nof Zion complex, a trustee for the bondholders said today in a report to the Tel Aviv Stock Exchange.

“The investors took upon themselves not inconsiderable risks and costs when they understood the timing and the importance of continuing to build the Nof Zion neighborhood,” David Hershkovitz, a Jerusalem lawyer who represented Levi’s group, said in a telephone interview.

The Nof Zion project was originally planned by Digal as a 395-unit development, most of it housing, and was marketed largely to Jews in the U.S. and France. Digal couldn’t attract enough buyers to complete more than one stage of construction, with 91 of the apartments built so far. Masri said he would complete the project and sell the remaining 304 apartments to Palestinians.

After initially accepting Masri’s offer as a group last month, 94.3 percent of the bondholders voted against him in the balloting released today while 5.7 percent abstained and no one approved, according to the trustee, Hermetics Trust Ltd. The Levi offer was approved by 76.8 percent of the bondholders while 23.2 percent voted against.

‘Approval in Principle’

Hermetics said the vote was for “approval in principle” and was not binding. It did not set a date for the final vote.

“Obviously we’re disappointed by the outcome so far,” Masri, chairman of Ramallah-based Massar International Group, said in a telephone interview from the West Bank city of Ramallah. “We will wait for the final results.”

For decades, Jewish groups have tried to buy land from Arabs to boost the Jewish presence in the east of the city. Israel regards all of Jerusalem as its capital while Palestinians see the sector captured in the 1967 Arab-Israeli war as the capital of a future state.

The U.S. and European countries have criticized Israeli building in east Jerusalem, saying it hurts efforts to reach a peace agreement that would establish a Palestinian state.

Digal lost 17 million shekels in 2009 and trading in its shares was suspended by the Tel Aviv Stock Exchange on Jan. 3 because of Digal’s failure to file its third-quarter earnings report last year. The company is under pressure from bondholders and Bank Leumi Le-Israel Ltd., which has lent 83 million shekels to Digal. Calls to Digal Chief Executive Officer Yehuda Levi weren’t returned.

To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net

To contact the editor responsible for this story: Louis Meixler at lmeixler@bloomberg.net;

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