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Michael Shah gets crafty to avoid Israeli bond default

55 Gansevoort to be sold as Delshah entity files for bankruptcy, buying time to pay debt

Delshah Files Chapter 11 to Avoid Israeli Bond Default
Delshah’s Michael Shah with 55 Gansevoort Street and 100 Christopher Street (LinkedIn, Google Maps, Getty)

Last week, Michael Shah avoided default on approximately $59 million in Israel bonds — by the skin of his teeth.

The debt offering, which Shah’s Delshah Capital closed in 2016 as part of a larger deal, was set to mature Sept. 30 and the firm had planned to sell the bonds’ partial collateral, 55 Gansevoort Street, to pay it off, a source familiar with the matter said.

A recent marketing post by Meridian showed Delshah hoped to nab $72 million for the property, which houses Restoration Hardware’s new boutique hotel. (“The famously secretive and private RH Guesthouse in Manhattan can be yours for just over $70 million,” it offers hopefully.)

The firm had a contract out in early May, but the buyer got cold feet, the source said. The retreat alarmed ratings agencies, as it raised fears that Delshah would not complete the sale before the bonds matured late last month.

The agency downgraded the debt obligations, which put the bonds in technical default and spooked bondholders.

So Delshah cut a deal. 

The firm had already gone into contract in August to sell 100 Christopher Street to Lions Group for $30 million, public records show. The source said bondholders agreed that Delshah would pay them with proceeds from the 100 Christopher Street sale and file a prepackaged bankruptcy to speed the deal.

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The Chapter 11 filing, which hit court records last week, also temporarily blocked the bondholders’ trustee from seizing control of Delshah Capital Limited, the parent company behind 100 Christopher and 55 Gansevoort.

If the trustee exercised that right, “the pending sale .. could be jeopardized,” an affidavit filed by Delshah’s CFO Patrick McCann detailed. Shah did not comment for this article.

After the filing, Delshah negotiated a maturity extension that pushed the bonds’ due date to Dec. 31, the source said.

The extra time allows the firm to sell off 100 Christopher. But the deal will only cover about half of what’s owed to bondholders.

Through the extension, Delshah also committed to sell 55 Gansevoort and to consider selling one of three loans it bought from Signature Bank in 2022 to pay off the difference, the source said.

Meridian’s site still lists 55 Gansevoort for sale. The source said Delshah had multiple contracts out and offers to recapitalize the property, which the firm is confident will pay off the bonds before the end of the year.

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Delshah CapitalIsraeli Bond MarketMeatpacking DistrictRestoration Hardware