- On the question of whether these are "unusual transactions" - Mizrahi Bank responds in the negative. With reference to the BTB Mizrahi, it is claimed that transactions of this type are carried out by the bank on a daily basis; that the transaction had no material impact on the company's financial situation, and that with the realization of the guarantee, Hefziba Investments' position remained the same as it was prior to the execution of the transaction. Discount Bank further clarifies that a company engaged in the real estate and construction market may also enter into transactions for the receipt of banking services in the course of its regular business - This includes receiving credit, taking loans and providing collateral, as in the case at hand. It was further argued by Discount Bank that the Special Manager's argument that there is no "market" for back-to-back loan transactions and in any case they were not conducted under "market conditions" should be rejected - This is evidence that transactions of this type were conducted by both Mizrahi Bank and Discount Bank, while both banks make use of standard agreements that are customary in their practice, and the interest margin charged by each of them is at a similar rate. As for an engineering transaction - Mizrahi Bank insists that the claim of the special manager, according to which this was an unusual transaction because its purpose was to release Mordechai Yona from his debt to Heftziba Engineering, was argued with a change of façade that is prohibited and should be rejected for this reason.
- On the question of whether the back-to-back transactions and the engineering deal meet the test of "the best interest of the company" - Mizrahi Bank argues that back-to-back loans are an accepted financial instrument, which is an important and legitimate tool in corporate tax planning; According to him, hundreds and thousands of such transactions are conducted in the Israeli credit market every year, with Bank Mizrahi alone providing more than 250 loans in this way. With regard to the claim that you made aBTB Mizrahi was a loss-making deal, in the sense that the interest rate that Heftziba Shikun was required to pay for the loan exceeded the interest rate that Hefziba Investments earned from the deposit, the bank clarified that the interest rate difference was negligible (0.35% per year) and that the shareholders in the companies were willing to bear it because the alternative would probably have been to bear a more expensive tax liability. In any event, according to Bank Mizrahi, the profitability of the transaction is not the type of matter that the bank's clerks are required to examine, and a large concern such as the Heftziba Group, which is accompanied by tax consultants and accountants, is presumed to have entered into the transaction after a comprehensive examination.
Moreover. Mizrahi Bank denies the claim that the entire purpose of the BTB Mizrahi transaction was to "beautify" and "inflate" the balance sheet of Hefziba Investments, and according to him, this claim has not been proven and constitutes a discount of the request; Moreover, according to the bank, the transaction actually benefited Hefziba Investments, with the deposit deposited in its account yielding handsome profits every year. According to the claim, those who were allegedly harmed by theBTB Mizrahi, due to the interest rate differentials as mentioned above, were actually the shareholders of Heftziba Shikun and Heftziba Investments - Their special manager attributes a "personal interest" to the deal - However, it can be assumed that this is an informed decision, based on the fact that other alternatives would have been more harmful (in terms of tax liability or any other cost). In this context, the Bank clarifies that a distinction must be made between the nature of the transaction and the manner in which it is presented in the financial statements - This is because any transaction can be presented in the reports in a misleading manner, and it is clear that misrepresentation does not make the transaction itself one that harms the company's interest, and certainly does not establish grounds for canceling it against a third party. In any event, there is no basis, for the bank's approach, to claim that the engagement between the parties constitutes an invalid contract.