Tel Aviv Court Orders Papaya Gaming to Revise Debt Settlement Proposal Amid Skills' Objections
The Tel Aviv District Court, presided over by Judge Iris Loshi Avodi, has instructed Papaya Gaming to improve its proposed debt settlement plan following strong opposition from its competitor Skills. Skills argued that the current proposal could harm their ability to recover debts. The judge called for a combined model incorporating owner contributions, investor search, and increased payments, at least in the initial stages of the settlement.
Judge Avodi plans to appoint a settlement administrator and issue a temporary stay of proceedings for 45 days to allow the administrator to develop a revised debt arrangement for creditor approval, pending Skills' consent expected by Wednesday morning. Skills' request to appoint a trustee and to immediately move to bankruptcy proceedings was denied. The judge emphasized the need for cooperation from Skills, cautioning against outright rejection of all proposals.
The dispute involves Papaya Gaming Israel and its US subsidiary, which were ordered by a US court to pay Skills $719 million. Given the enormous sum exceeding the companies' cash reserves, Papaya Gaming sought to freeze the US judgment and propose a debt settlement ensuring full repayment to creditors. Papaya Gaming acknowledged the US ruling but intends to appeal through proper channels while proposing to deposit 140 million shekels annually into an Israeli court escrow account.
Judge Avodi classified Papaya Gaming as cash-flow insolvent, requiring collective debt restructuring principles. She criticized the current plan, which relies solely on company revenues over six and a half years, as insufficient and urged a model involving shareholder funding and investor involvement. The judge noted the difficulty in attracting investors given the large judgment but stressed the importance of shareholders injecting funds to sustain operations.
Skills' legal counsel expressed concerns about the optimistic revenue projections and the lack of contingency plans for market changes. They denied any intent to eliminate Papaya Gaming, stating their interest lies solely in debt recovery. The court also addressed allegations from the US ruling about deceptive practices by Papaya Gaming, with the judge rejecting claims of intentional fraud but acknowledging some misleading behavior. Discussions included dividend withdrawals by shareholders and the necessity for those who benefited to contribute to the settlement.
Papaya Gaming's lawyer highlighted the company's profitability, stable client base, and supplier payments, noting minimal dividend distributions since the US judgment. The US court recently denied Skills' request for a temporary injunction to block fund transfers to Israel. The judge underscored the economic impact of halting Papaya Gaming's operations, which support about 300 employees and numerous suppliers, emphasizing the need to preserve the company rather than dismantle it.
