In Re Gold & Honey, Ltd.

In 1993, New York-based jewelry maker Almond Jewelry (debtor) decided to move a manufacturing facility from New York to Israel. The Israeli government provided $35 million in grants and loans to Gold & Honey Ltd. (GH Ltd.) (debtor), an Israeli corporation Almond partially owned, because Israel did not give foreign partnerships government incentives. GH Ltd. pledged assets as collateral. In 1996, the Israeli government assigned the interest to Gold & Honey LP (GH LP) (debtor), a New York partnership with both Almond and GH Ltd. as general partners, and GH LP pledged collateral. All three debtors maintained primary bank accounts at the First National Bank of Israel (FIBI), which extended GH Ltd. a $9 million working line of credit guaranteed by GH LP. When FIBI increased the line of credit to $12 million in 2003, then to $16 million in March 2008, GH LP pledged additional collateral. In July 2008, FIBI seized substantially all of GH Ltd. and GH LP’s assets and accounts and commenced Israeli receivership proceedings. Shortly thereafter, the debtors filed under Chapter 11 in New York. Despite the automatic stay, FIBI continued its receivership application. The debtors requested an order determining that the stay applied to their property wherever located, particularly in the Israeli receivership proceeding. The bankruptcy court ordered that the stay be applied to the debtors’ property “wherever located and by whomever held,” but FIBI continued prosecuting the receivership application. The Israeli court declined to give effect to the automatic stay or the bankruptcy court’s order and appointed receivers for GH Ltd. and GH LP. In January 2009, FIBI moved for recognition of the Israeli receivership proceedings as foreign main proceedings under Chapter 15 of the Bankruptcy Code.