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Have Galia Maor, the chief executive of

Bank Leumi (TASE:


), and the bank's credit officer Ehud Shapira, completely lost it?

Their sanity was the talk of the town yesterday after the press reported that the Dankners will be scooping up hundreds of millions of shekels as they reorganize their companies, while meanwhile, Bank Leumi will be lending the Dankner firm

Ellern Holdings (TASE:


) another half-billion shekels to finance the reorganization.

The picture arising from Ellern's prospectus is frightening. The company has borrowed hundreds of millions of shekels to buy shares in three Dankner family companies from the Dankners, while the Dankners are waltzing off with millions and leaving the banks and minority shareholders holding the risk.

The image is doubly frightening when you consider that most of the Dankner family companies are already leveraged to their gills, holding loans in the billions. The family reorganization heaps hundreds of millions more in credit onto the companies, which are already having trouble servicing their loans.

But no. Bank Leumi's chiefs have not gone barking mad. Two years ago, businessmen could have waltzed off with the money and left the bank holding the risk, but not any more. These days, when a bank extends fresh credit, it has to have good reason.

Indeed, the Dankners are selling their shares in

Israel Salt Industries (TASE:



Dankner Investment (TASE:

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) and

Dor Chemicals (TASE:


) at premiums of 20% to 40% above their market levels. But they won't get to slip penny one into their private piggy banks. Every sou goes straight to the banks.

This is a good time to remember that the deal responsible for the whole reorganization of the Dankner empire was back in November 1999, when Yitzhak Dankner, Nochi Dankner, Shelly Dankner and the Gilinsky family, sold their holdings in Dankner Investment to the rest of the family for over $100 million in cash.

Those were the merry days of broadband, when Dankner Investment's holdings in cable television, cellular and international operators made it one of the hottest telecoms concerns around. Shmuel Dankner didn't hesitate: when his nephew Nochi Dankner, with whom he was fighting, offered to sell his shares in the company, he and the rest of the family borrowed money from Leumi and others and bought Nochi out, at a company value of $400 million.

The bubble burst and so did Dankner Investment stock. The block of shares bought from Nochi and beforehand shrank by 80% in value. That $100 million turned into $20 million.

Three years later, interest rates have soared and the credit crunch is just growing worse. For the last year the Dankners have been scrabbling to reduce the terrific financial burden they personally undertook during the bubble days.

The Ellern deal is their solution. The Dankners are selling all their personal holdings in three publicly traded companies to Ellern, which they control. They are getting a ton of cash, which will go to repay their personal loans. The major debt remains as is, it just passes to Ellern.

Bank Leumi has yet to approve the deal. It will probably want all the family members, or some at least, provide substantial personal guarantees before agreeing to roll their debt onto Ellern.

The Dankners are far from being the only ones to take on huge personal debts during the bubble era. Many of Israel's biggest tycoons are sitting on debts that, if disclosed in full, would make their fortunes look pretty small in the eyes of the public.

The ones who do get to take the money home are the branch of Yitzhak, Nochi and Shelly Dankner, who did not borrow the bank during the bubble boom and are now selling their Salt Industries and Dor Chemicals stock for NIS 100 million. But even that money is fated to reach the banks soon enough. Nochi Dankner, uncowed by history, remains anxious to conquer new heights and is determined to acquire control over IDB Holding Corporation from the Recanati and Carasso families.

The 50% discrepancy between the price Nochi is supposed to pay for the IDB Holding Corporation shares, and the shares' present market value, has not spoiled his appetite for the deal. While the rest of Israel's businessmen are scaling back their businesses and hunkering down, Nochi is busy wrapping up financing for his mammoth deal.

If the marketplace picks up, Nochi's move together with the Manor and Livnat families could prove to be one of the biggest coups in the history of Israeli business. It would make Nochi a superstar, as the only one who dared while the business sector dithered in crisis.

And if the marketplace does not pick up in the next couple of years? Then Nochi may find himself exactly where the rest of his family is: sewing up internal deals to roll over loans. But come what may from the Dankner dealings, Bank Leumi has not gone ga-ga: it will make sure to get its money back, with all that high interest thereon.