Temporary liquidation order for Eurocom Real Estate

The troubles continue: The President of the Tel Aviv District Court appointed temporary receivers for the company as a result of two dissolution requests filed against it. The judge: “There is no dispute that the company is in insolvency”

06.05.18 | Lital Dubrovitzky

The President of the Tel Aviv District Court, Judge Eitan Orenstein, today issued a temporary liquidation order for Eurocom Real Estate and appointed attorneys Shaul Kotler and Shalom Goldblatt as the company’s temporary receivers.

The judge clarified that there was nothing in the appointment of the temporary receivers to harm the powers of attorney Haggai Ullman, who was appointed as temporary receiver to realize assets pledged to Mizrahi Tefahot Bank for a debt of approximately 250 million shekels.

The judge gave his decision after two liquidation motions were filed last month with the Tel Aviv District Court against Eurocom Real Estate. One motion for liquidation was filed by the companies Tzemach Hammerman and Neve Tzedek on the Sea Corp., alleging a debt of about ILS 11 million shekels.

In the framework of the liquidation request, the companies, through law firm Schnitzer Gottlieb Samet & Co., claimed that the petitioners requesting the liquidation, together with Eurocom Real Estate, were the developers and executors of the project to build the prestigious residential tower WHITE CITY in Neve Tzedek in Tel Aviv.

According to the petitioners, “towards the end of the project, Eurocom Real Estate approached the petitioners with a request for a loan”. The loan amount, it is claimed, was about 10 million shekels. It is also claimed that at the end of 2017, Eurocom Real Estate had to pay the petitioners an interest payment of about 354 thousand shekels, which was not paid. It is further claimed that as of April 2018, Eurocom Real Estate owes the petitioners approximately 22.1 million shekels.

A further request for a liquidation order against Eurocom Real Estate was filed by A.A. Rubinstein Protected Tenant Properties, which claimed that  it was owed approximately 16.8 million shekels. Last December, it should be recalled, Mizrahi Tefahot Bank filed a request to enforce liens and appoint a receiver, among other things, on Eurocom Real Estate assets – including Eurocom Real Estate holdings in the Midtown project (where the company has holdings in the project alongside other partners in the project that are not related to Mizrahi’s request). A.A. Rubinstein Protected Tenant Properties is represented by attorneys Assaf Englard and Zohar Ilan of law firm Hamburger Evron & Co.

In his decision to appoint temporary liquidators for the company, Judge Orenstein ruled that “there is no dispute as to the company’s insolvency”, he authorized the liquidators to seize and manage the company’s assets and made it clear that the receivers’ authority extended only to those assets not part of the assets realized by the receiver appointed at the request of Mizrahi Bank.

The concern: Eurocom Real Estate served as a conduit for transferral of funds to Eurocom Communications
Eurocom Real Estate is part of the Eurocom Group. The companies that filed for its liquidation claimed that there was a need to appoint temporary receivers, among other things, so that they could look into the concern that Eurocom Real Estate perhaps served as a conduit for transferring funds to Eurocom Communications, for which temporary receivers had been appointed, and the nature of the relations between the companies in all matters relating to the granting of mutual guarantees.

The significance of Judge Orenstein’s decision is that the temporary receivers, alongside the receiver, will act to preserve the rights of the company’s creditors.  The Custodian (the Official Receiver) noted before the court that the appointment of temporary receivers to the company is justified in order to ensure the interests of its unsecured creditors. The temporary receivers will be able to seize the assets of the company and, where necessary, manage them. Also, it was ruled that these assets would not be realized except with the approval of the court.