Zarasai Group Faces Insolvency Proceedings Amid Bondholder Dispute
Mesharer, the trustee for Series E bondholders of real estate company Zarasai Group, has asked the Tel Aviv District Court to initiate insolvency proceedings against the company. The court's Deputy President, Hagi Brenner, has temporarily prohibited the disposal of Zarasai's assets and ordered the company to respond within a week. Zarasai, controlled by Yoel and Shari Wiener and incorporated in the British Virgin Islands, focuses on rental residential real estate in New York. Its bonds, issued in Tel Aviv since 2016, reflect a company valuation of NIS 140 million.
In 2025, Zarasai reported a $389 million decrease in investment property value and a $618 million loss. Last year, Summit Company's offer to purchase Zarasai's problematic assets for $450 million fell through. This year, Flagstar Bank foreclosed on Zarasai assets worth $451 million, resulting in a $107 million loss relative to the group's debt to the bank. Mesharer states that two series of bonds remain partially unredeemed: Series E with a NIS 277 million face value and Series C with a NIS 902 million face value, issued without collateral.
Mesharer's filing asserts that Zarasai's financial condition has deteriorated due to business environment changes, eroding asset values and leading to significant financial decline. The company has been insolvent for an extended period, attempting to liquidate assets and distribute them to creditors outside formal insolvency proceedings, as seen in previous debt arrangements for Series E and C bonds approved by the court. These arrangements included collateral for Series C bondholders and additional assets injected by the Wieners. The maturity date for Series E bonds was extended to the end of 2026, contingent on asset sales, but Mesharer claims Zarasai failed to meet these terms.
Mesharer highlights a $100 million gap between the collateral value of five New York properties and the outstanding debt for Series E. Zarasai's insolvency is further evidenced by a $310 million equity deficit reported at the end of the first quarter, a "going concern" note in its financial reports since 2024 indicating a lack of funding for debts, failure to pay principal and interest on Series C bonds since May of the previous year, and an inability to meet Series E obligations. A deep dispute exists among bondholders of both series regarding the distribution of funds from subsidiary asset sales. The Series E bondholders' meeting instructed Mesharer to file the insolvency request to clarify rights under law. This follows the Series C trustee's announcement of an intention to distribute NIS 155 million, which Mesharer argues would irreversibly harm Series E bondholders' rights, as it would deplete assets before ownership and collateral validity are determined.
