Eldan Tech Ltd. (TASE:ELDN) has suspended with immediate effect all capital transfers to two US subsidiaries that own 80% of 24 apartment blocks in the Bronx, New York City. The subsidiaries, OCG-1 LLC and OCG-8 LLC, own 782 apartments altogether. The company's board will seek to sell all or part of its US property portfolio and to reach a settlement with its lender banks.
Until now, Eldan Tech provided the subsidiaries with owners' loans, which were used to finance the subsidiaries' current financing, mainly for the repayment of bank loans used to buy the properties. These capital flows amounted to $1 million per quarter.
Eldan Tech's board, on the basis of an assessment by the company's management, concluded that the capital transfers were no longer worthwhile and not in the best interests of the company, because the expected investment in the subsidiaries was liable to be greater than any income from them from any future sales.
Eldan Tech may have to immediately repay the bank loans, or the banks may foreclose the guarantees for the loans and sell all or part of the portfolio. As a result, the company could face a material loss in the value of the portfolio, which will affect the company's financial results. At the end of June 2008, Eldan Tech valued its US portfolio at NIS 175 million and its liabilities at NIS 144 million. The company had a negative capital of NIS 16 million because of these owners' loans.
Published by Globes [online], Israel business news - www.globes-online.com - on October 12, 2008
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