Israeli Investment Firm Mor Buys One-Third of Bonds Issued by Troubled Foreign Companies on Tel Aviv Stock Exchange
Two recent cases have exposed financial irregularities in foreign real estate companies listed on the Tel Aviv Stock Exchange (TASE), raising concerns about the protection of Israeli bond investors. In March, Kohan Properties, a British Virgin Islands (BVI) real estate firm controlled by Mike Kohan, raised 412 million shekels through bond issuance. It was revealed in late May that Kohan withdrew approximately 9.6 million dollars (around 30 million shekels) from company funds to repay a personal loan, and another 7 million dollars (21 million shekels) were used to repay a loan from Barzel Global, a company owned by Uri Eisenberg, whose firm also provided consulting services to Kohan for about 2 million dollars. These transactions were not disclosed in the bond issuance documents or the company’s first-quarter financial reports. Kohan later returned the funds after acknowledging the unauthorized withdrawals, but the bond price plummeted 20% on the TASE.
This is the second such incident within two months, following the sudden collapse of Simad, a summer camp company that raised 620 million shekels in December before its owners transferred 34 million dollars (about 100 million shekels) from company funds to cover private debts. Both Kohan and Simad had received investment-grade bond ratings (A2 and A3 respectively) from Midroog before issuance. Critics highlight poor corporate governance in BVI companies, which are often established solely for bond issuance and controlled by owners who treat company funds as their own.
Mike Kohan, originally from Iran and founder of KRIG (Kohan Retail Investment Group) in New York, specializes in acquiring distressed commercial real estate assets in the U.S. His strategy involves quick purchases and asset improvements but has drawn criticism for often being the "last owner" before mall closures. Kohan previously managed commercial centers in the U.S. for Israeli real estate firm Summit until 2024.
Investment house Mor was the largest investor in Kohan’s bond issuance, committing 146 million shekels (over one-third of the raised capital) through provident funds and mutual funds. Mor also invested heavily in Simad, totaling over 330 million shekels in both companies. Other major investors include Phoenix, Meitav, Clal Insurance, Alternative Investment House, and Migdal Capital Markets. Mor stated it conducts thorough due diligence but acknowledged that no analysis can predict alleged fraud.
Following the revelations, Kohan’s board appointed a compliance officer and an external CFO, and discussions began regarding interest on shareholder deposits. The Securities Authority’s oversight has been criticized for being reactive rather than preventive. Underwriters of these BVI bond issuances receive high fees, with IBI Underwriting earning over 12 million shekels for Kohan’s issuance. Market insiders expect increased scrutiny on future BVI bond offerings, though many such companies have historically provided good returns. The recent cases underscore the need for stricter regulation of BVI companies listed on the TASE.
