At least one of the big banks will send Gad Zeevi an official default letter by the end of this week after the cash-strapped tycoon failed to meet interest payments due last Thursday week on loans taken to buy shares in the state-run Bezeq phone company.

In 1999 Zeevi bought a 20% stake in the state-run phone company in 1999 the British company Cable and Wireless. He borrowed about $710 million from a consortium of seven Israeli banks to buy the shares, which he put up as collateral for the loans. Last Thursday Zeevi was due to pay $45 million interest on the loans.

The letter will is the official stamp on efforts to seize his Bezeq shares. It would also end the banks' cooperative effort to extract the money back from Zeevi.

Zeevi's default effectively ended the shelf-life of the banking consortium established for a limited two-year period. It released the banks from their commitment to act as a group to collect the monies.

Some of the banks could decide to put off seizing the collateral, while others might go ahead and demand instant repayment.

Some of the banks have indicated they believe Zeevi is working to raise the monies owed, and that he might pay within days.

Zeevi's collateral includes his 20% stake in Bezeq, and a $150 million letter of credit granted to the banking consortium by the Swiss branch of the First International Bank of Israel. FIBI itself granted 16% of the loan, while the bigger lenders were Bank Leumi (30%) and Bank Hapoalim (also 30%).

Even if Zeevi defaults, the banks aren't about to collapse. Bezeq stock has rallied from its low point of the year to a market cap of $3.3 billion, which makes the 20% stake in Bezeq worth a total of $660 million. Zeevi's debt to the bank, including interest due, is $750 million. Added to the $150 million collateral put up by FIBI, the total collateral at the consortium¿s disposal comes to $810 million.

Zeevi's debt to the bank, totaling $750 million, is comprised of $635 million taken out at first, an $80 million second loan, and the $45 million in interest. It is unclear what was Zeevi has done with the $80 million.

As it appears at the moment, Bank Hapoalim and Bank Leumi each will soon have a 6% holding in Bezeq worth nearly $200 million.