The non-bank credit company, Value Finance, experienced a significant loss in equity finance value in 2022 due to a deterioration in their credit portfolio collection capacity and multiple legal proceedings. This was exacerbated by the collapse of Unit Credit and Financial Backup, resulting in the disappearance of tens of millions of shekels. Value Finance reported a loss of NIS 25 million for the past year, with auditors noting a deficit of NIS 10 million in working capital. Despite these difficulties, the company’s management plans to continue its activities and meet its obligations. Value Finance’s income (net) from credit provision eroded by 35% in 2022, and the provision for credit losses increased to NIS 26 million, causing a heavy loss. The company’s stock lost around 94% of its value, with IBI and Moore among the victims. The controlling owners of Value Finance agreed to reduce their salary by 50% owing to the company’s state.
Deterioration in the collection capacity of the credit portfolio managed by the company, along with numerous legal proceedings, led to the deletion of almost half of the non-bank credit company’s equity Finance value in 2022. This was in the year when two of the companies operating in the industry collapsed – Unit Credit and Financial Backup, where serious irregularities occurred that caused the disappearance of tens of millions of shekels.
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Value Finance, controlled by Noor Eliyahu, Yossi Wasserman and Abinoam Ben Nun (who own about 37% of the shares) reported a loss of NIS 25 million in the summary of the past year, with the auditors attaching a note to its reports referring to a deficit of NIS 10 million in working capital, and stating that “according to The company’s management will be able to realize its plans, and according to the cash flow forecast, it will have sufficient funding sources to continue its activities and meet its obligations in the foreseeable future.”
The difficulties encountered by the company are explained by the “deterioration in the ability to collect the credit portfolio and the proliferation of legal proceedings, among other things as a result of the increase in interest rates and inflation in the economy, the reduction and tightening of the conditions for receiving bank credit, as well as the collapse of two non-bank credit companies during the second half of 2022. These affected the ability The return of the company’s customers and a phenomenon of cancellations of checks by the customers in higher volumes than in the past.”
Value Finance ended the year 2022 with a 35% erosion in income (net) from providing credit to NIS 6.5 million, when the provision for credit losses swelled to NIS 26 million and led to the heavy loss. This is against a provision of only NIS 1.5 million in 2021, which ended with a net profit of NIS 1 million.
IBI and Moore – among the victims of the fall of the stock
The company’s stock lost about 94% of its value at its peak just two years ago, and as of today it reflects a negligible market value of about NIS 13 million. A notable victim of the sharp decline is the investment house IBI, which owns about 21% of Arach Finance shares, and loses tens of millions of shekels on paper for its investment in the company.
Another investment house that was exposed to the activities of Arar Finance is Moore, through his provident fund company, which provided it with a credit line of NIS 50 million in August 2021, when in February of last year Arar Finance withdrew the entire credit line for what was defined as the expansion of its operations.
Last July, against the background of the worsening of the negative sentiment towards the non-bank financing companies, Mor Gemel informed Value Finance about the early repayment of the credit line it had extended to it. According to its reports, in September Value Finance repaid NIS 12.75 million from the credit line, and subsequently until December 12 last year it repaid NIS 27 million. As of the date of the financial statements, there is still a framework of 22.8 million shekels left to be repaid.
“Many cases in legal proceedings or debt settlement”
Value Finance deals in the branch of non-bank financing (discounting of deferred checks and provision of non-bank loans). According to the reports, it serves close to 100 clients, about half of them from the fields of construction and real estate and the rest from the fields of finance (sub-directors), agriculture, industry, high-tech, cosmetics, textiles and more.
The company states in the reports that “During the second half of the year there was a deterioration in the condition of the credit portfolio, and the number of cases transferred to legal treatment increased significantly compared to previous periods.
“In addition, a large number of customers who have not yet reached legal proceedings are in the process of settling and distributing payments for their debt. Also, in light of the fact that the company does not have significant sources of financing from banking and other sources, and it is also required to repay the loan to Mor by August 15, 2023, the company is not carries out new underwriting and credit granting procedures, with the exception of isolated cases. The company is currently working on maximizing the collection procedures for all of its customers.”
The balance of the open debts in the credit portfolio of Arar Finance, after the provisions made last year, stands at NIS 48 million, of which NIS 33 million is debt that is defined as having an increase in risk, or as defective debt.
In view of the sad state of the company, the three controlling owners – Wasserman, Eliyahu and Ben Nun – announced that they unilaterally agree to reduce their salary by 50%.