ADO Bondholders Sue Owners, CEO, Directors for 118 Million Shekels

The trustee for the bondholders of ADO Group, attorney Amit Ashur, is suing for 118 million shekels against the company, the German Adler Group that controlled it, Austrian investor Jawdat Kaner, CEO Florian Seithe, and directors Ben Ir and the Director. The lawsuit, filed in the Tel Aviv District Court, alleges that Adler and its associates intentionally acted to strip ADO of its assets, causing severe damage to the bondholders. ADO, which was controlled by the Apollo fund and Moshe Dayan, dealt in residential income-producing real estate in Berlin through its subsidiary ADP. Adler acquired control of ADO in September 2019 for 708 million euros in cash and delisted it from the Tel Aviv Stock Exchange, a move that yielded shareholders a profit of 1.25 billion shekels relative to the company's market value. Ashur stated that ADO had raised 1.15 billion shekels from bondholders between 2015 and 2018, based in part on its commitment to control and operate ADP solely in Berlin residential real estate. "However, the defendants then devised and executed a plan of actions that flagrantly and completely violated all the fundamental provisions under which the loan was taken and the bonds were issued," Ashur claims. He added that the company ceased controlling ADP, effectively emptying it of substance, its holding in ADP became impaired and diluted, and the bondholders' collateral was severely damaged. Furthermore, the company's business scope was changed to the riskier field of real estate development. According to Ashur, "The conspiracy involved a series of circular transactions in the shares of the company, ADP, and three other companies, Adler, Aggregate, and Consus, at the end of which the company was effectively stripped of its assets, the bondholders' collateral was critically damaged, and there was a material deviation from the exclusive field of activity." He asserts that ADO ceased to be the controlling party of ADP, and instead, ADP, Adler, and Consus became a unified business entity operating under the name 'Adler Group,' controlled by Kaner and his associates, as planned. The lawsuit details a pre-planned maneuver, financed by a 3.46 billion euro credit facility from J.P. Morgan. Initially, Adler took over ADO, appointing its own directors and CEO. Subsequently, ADP purchased Adler's shares, resulting in ADO's holdings in ADP, the bondholders' primary collateral, becoming dormant and non-voting shares. In the final stage, ADO, Consus, and Adler became a corporate cluster under Kaner's control. Ashur further explained, "Thus, within a few months, through complex and circular financial transactions, supported by heavy financing from ADP's own resources, Kaner and his associates became the controlling parties of the Adler Group, which includes ADP, Adler, and Consus." He highlighted that ADO became an empty shell, the trust indentures were violated, bondholders faced significant risk of non-repayment, their collateral (ADP shares) became impaired and non-voting, and Adler Group's debt increased by billions of euros, posing a risk of immediate repayment demands from other creditors. Following these actions, the bondholders' trustee (Reznik-Paz-Navon) declared the outstanding balance due for immediate repayment. ADO transferred the principal balance plus interest and linkage to the trustee but refused to compensate the bondholders for their alleged damages, which it denied. Ashur stated the lawsuit seeks compensation for these damages, or at least for damages resulting from the early repayment. The lawsuit was filed by attorneys Ra'anan Klir and Tomer Shaked, and no defense statements have yet been submitted.