Koor Industries Ltd. (TASE:KOR) has signed new credit lines with Citigroup Inc. (NYSE: C) and Morgan Stanley (NYSE: MS), which lent it the money for its purchase of Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ) shares, due to the drop in the bank's share price. Koor, controlled by Nochi Dankner through IDB Holding Corp. Ltd. (TASE:IDBH) holding company Discount Investment Corporation (TASE: DISI), may sell some Credit Suisse shares to increase its collateral as part of the deal but it likely to wait until the share price rises.
The core of the agreement is to raise the ratio of the collateral to the value of the Credit Suisse shares on Citigroup and Morgan Stanley have liens. The banks will also lower the floor price of the Credit Suisse shares at which they can compel Koor to sell them immediately, and they raised the interest rate on the loan to LIBOR plus 1.7-2.95% from LIBOR plus 1.7-2.6%.
Koor can opt to lower the debt-collateral ratio by increasing its deposited liens by selling Credit Suisse shares. The company currently owns 3.12% of the bank, and its paper loss on the holding stands at NIS 2 billion. Koor bought Credit Suisse shares for NIS 6.97 billion between May 2008 and March 2010, but their current value is NIS 4.7 billion.
Koor currently has NIS 1.2 billion in deposits with Citigroup and Morgan Stanley and it owes them NIS 2.8 billion.
Koor CEO Raanan Cohen said, "The Credit Suisse investment is a strategic investment for Koor. The improvements in the credit agreements with Citigroup and Morgan Stanley are the results of dialogue and the good relationship between them and Koor. The improvements were necessary in view of the economic conditions in Europe, which have affected the global financial system, and they provide us with high flexibility and reflect the banks' comfort about Credit Suisse's business stability and IDB's financial soundness."
Koor's share price fell 0.8% in morning trading to NIS 60.04, giving a market cap of NIS 2.87 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on July 19, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011