Bonds holders of Israel Petrochemical Enterprises Ltd. demanded to enforce liens registered in their favor due to the precarious financial situation of the company.
The Court accepted the motion. Although a company creditor has the responsibility to act in good faith towards other creditors, it may not be required to sacrifice its interests in favor of the interests of other creditors, especially when there is a conflict of interest between them. Here, the bond holders had a variety of legitimate reasons for realizing the liens recorded to their favor, such as apprehension of unpayment of the debt, material deterioration in company business, apprehension that the company would not meet its obligations or due to the crystalizing of a debt settlement which would not be in their favor. The other bond holders do not have an incentive to exercise the liens in their favor due to the differences in the ratio between the encumbered shares and the net debt of each of the bond series. Thus, they bond holders have the right to exercise the liens, even if it harms the other company creditors.