Debt Crisis Escalates as De Leers Bondholders Clash Over Payment Strategy

The financial struggle within Israeli real estate company De Leers has intensified amid a dispute between different bondholder groups. The conflict centers on an imminent payment due to holders of Series Z bonds, amounting to about one-third of the company's debt, scheduled for Tuesday. Holders of Series H bonds oppose this payment, arguing that it could jeopardize De Leers' future ability to service its debt. They have formally urged company executives to reconsider the payment, citing the company’s challenging financial condition, including a working capital deficit of approximately $154.5 million in 2025 and a one-third reduction in equity since 2019.

The Series H bondholders accuse De Leers of engaging in related-party transactions below asset value to meet obligations, which they claim undermines the company’s capacity to repay nearly 300 million shekels owed to them by year-end. In response, De Leers’ board rejected these claims, condemning the Series H bondholders’ demands as an audacious attempt to influence company management and provoke default for personal gain. The company emphasized it is acting responsibly and decisively, having liquidated significant assets this year at book value to generate cash.

De Leers, originally incorporated in the British Virgin Islands (BVI), was the first such company to list bonds on the Tel Aviv Stock Exchange, pioneering a trend of foreign real estate firms raising billions in Israeli debt markets. Since its 2008 debut, De Leers has issued nearly 4 billion shekels across nine bond series. Currently, three series (Z, H, and T) remain tradable, totaling about 1.1 billion shekels. Bond yields have surged this year, reflecting investor skepticism: Series Z yields 62%, Series H 23%, and Series T 39%.

The company’s troubles mirror a broader pattern of BVI real estate firms facing governance issues, transparency deficits, and debt repayment challenges, leading to multiple defaults in recent years. Notable cases include Canadian UrbanCorp in 2015 and others like Starwood, Brookland April, and Hertz Properties. More recently, firms such as De Zrasai, Pacific Oak, and Simad have also encountered distress, with Simad drawing media attention after allegedly depleting its funds shortly after raising 620 million shekels in December.

This ongoing dispute highlights the precarious state of De Leers and the wider risks associated with BVI-registered real estate companies listed on the Tel Aviv exchange, as stakeholders debate how best to navigate looming debt obligations amid financial instability.