RAPAPORT...
The Lorenzi Story
Editor's Note: The Lorenzi story continues to develop. Information
in this story is based on sources believed to be reliable, but has not
been confirmed due to the sensitive and confidential nature of the
situation. Here is what we know as we go to press Thursday 10/01/98.
Lorenzi, Israel's third largest diamond exporter (1997 exports of
$177 million) is experiencing severe financial difficulties.
About two weeks ago the firm's checks were returned by Israeli
banks who have restricted credit facilities. Lorenzi, a CSO
sightholder, is active in the rough and polished markets with
extensive debt and international holdings.
Lorenzi owes Israeli banks $55 million ($23 million to Discount, $17
million to Leumi, and $15 million to Mizrachi) and an additional $29
million to the trade in Israel and Belgium. In the U.S., Lorenzi says
he owes $9 million and is owed about $25 million by the U.S. trade.
Lorenzi has a controlling interest in a Japanese public company,
Hohrin, which owes $60 to $70 million in Japan.
In talks with RDR,Yossi Lorenzi said the firm is experiencing cash
flow problems due to delayed payments by large U.S. customers and
excessive polished inventories. Lorenzi says that the company's assets
are greater than liabilities and the cash flow problems are a result
of an unwillingness by Israeli banks to provide sufficient export
financing. He says that the firm paid out about $10 million to the
trade just days before the trouble started. It is currently
negotiating with the Israeli banks on a comprehensive overall
agreement which will include settlement of all debts with the trade,
and credit facilities which will allow the firm to continue operating.
The word in Israel's diamond exchange is that Lorenzi has offered
debtors the following deal:
- Debtors up to $200,000 -- 70 percent cash and 30 percent over 3
years;
- Debtors $200,000 to $350,000 -- 35 percent cash, 35 percent
goods, 30 percent over three years;
- Debtors over $350,000 -- 70 percent goods and 30 percent cash
over 3 years.
A majority of trade creditors have reportedly
accepted the deal but the banks have not yet made a decision.
Hesitation by the banks is creating concern in the trade. So far
the banks have not requested a receiver for Lorenzi's assets. Israel's
central bank is reportedly concerned about the situation and is likely
to request a tightening of credit to Israel's diamond industry.
Israel's diamond industry currently owes the banks about $1.1 billion.
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