, the U.S.-registered venture capital fund set up by Israeli entrepreneur Jason Barzilay, has filed for Chapter 11 protection from creditors in the U.S. courts.
Since May Argoquest, which targeted mainly the Israeli technology scene, has been operating with suspended legal proceedings hanging over its head.
It is the first case in Israel of a venture capital fund applying for protection from creditors. The fund owes some $15 million to Bank Hapoalim and Bank Leumi for loans taken during 2000. It is currently negotiating a rescheduling arrangement with the two banks.
Market sources surmise that its filing for Chapter 11 is designed to pressure the Israeli banks into reaching a compromise over its debts. Insofar as is known, no such compromise has been reached.
Sources at the company said that its main shareholder, Barzilay, is prepared to infuse fresh funds if an arrangement can be reached with the banks.
Unlike most major VC funds, which are set up as partnerships and rely entirely on investor money, Argoquest also borrowed from banks to finance most of its investments in startups. It is thought to have some $40 million under management, but is thought to be unable to meet its repayment schedule.
Its main investors, the banks aside, include Roy Disney's investment company Shamrock Holdings, Broadcom, and the international financial group HSBC.
Though registered in the U.S., Argoquest's management company was located in Israel.
Argoquest's investments include in
. Another, Comsense, is in receivership. Altogether the company portfolio has 20 active companies, it says.
Sources at Argoquest said that the company identified the downswing in its target market and cut back investment and management costs at a relatively early stage of the crisis.
About a year and a half ago Argoquest recruited former Shin Bet security chief Ami Ayalon, in a highly publicized move, to act as its chief. He left the company half a year later.