The First International Bank of Israel is holding advanced talks to exchange debt owed it by United Pan-European Communications (Nasdaq:UPCOY, ASE:UPC) for shares in the Tevel cable television company.

UPC holds a 46.5% interest in Tevel, which FIBI would take in exchange for writing off the European company's NIS 250 million debt around €55 million.

UPC was due to repay the debt in a couple of months, TheMarker has learned.

The deal would result in a new ownership structure for Tevel: Discount Investment Corporation would hold 48.5%, FIBI would have 46.5%, changing its status from key creditor to substantial shareholder. It would also change FIBI's status when discussing Tevel's tremendous debt to the banks, led by Bank Leumi.

Under Israeli law, a bank may not hold more than a 20% interest in a non-banking corporation. FIBI will therefore need special regulatory permission for the deal, giving it time to reduce its holding to 20%.