• Tel Aviv judge seeks arrangement for company's creditors
  • Toronto developer plans asset sale months after debt issue

A Tel Aviv court ruled in favor of Urbancorp Inc.’s Israeli bondholders after the Canadian residential developer filed for a debt restructuring.

Tel Aviv District Court Judge Eitan Orenstein late on Monday named attorney Guy Gissin an officer of the court with the power to seize any of Urbancorp’s assets and seek all information about the company’s operations and its controlling shareholder Alan Saskin, according to an e-mailed court filing. The court authorized Gissin to formulate a first draft for creditors’ settlement, according to the filing. Gissin will need to present his first report by May 8 with a hearing scheduled for May 22.

“The company has apparently violated its commitments to its bondholders in a way that gives the holders the right to immediate repayment of the debt,” Judge Orenstein wrote in the filing.

At least 16 North American-based property companies have borrowed more than 9.6 billion shekels ($2.5 billion) from investors in Israel since 2008. Urbancorp, one of Canada’s largest residential developers, is the first to file for bankruptcy protection as the company sought to sell assets to dig itself out of debt.

“Urbancorp is an exceptional case and doesn’t represent the norm but as a result we are likely to see Israeli investors be more skeptical about future debt offerings by foreign real estate companies,” Ilan Azoulay, chief investment manager at Tel Aviv-based Epsilon Investment House Ltd., who manages about 8 billion shekels, said by phone. “We decided not to buy Urbancorp’s bonds as the yield they were paying didn’t warrant the risk for a highly-leveraged company with not enough financial strength.”

Only four months after Urbancorp raised 180 million shekels in debt on the Tel Aviv bourse with a coupon of 8.65 percent, the price of its bonds more than halved, its Israeli directors and legal advisers resigned, and trading in the securities was halted. The debt was bought mainly by the mutual funds of Israel’s largest institutional investors including Psagot Investment House Ltd., Meitav Dash Investment House Ltd. and Ayalon Investment House Ltd.

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