The sale of the controlling interest in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) to a Chinese consortium led by JT Capital Fund pte Ltd. has collapsed, as "Globes" reported on Wednesday. The shockwaves are now threatening its parent company, IDB Development Corporation Ltd. (TASE:IDBD), because of its challenging cash flow situation.
JT Capital, headed by Hong Kong-based businessman Li Haifeng, and its partners had been waiting this week for a strong indication whether Supervisor of the Capital Markets, Insurance, and Savings Dorit Salinger would approve the deal. She did not. Market sources told "Globes" today that Salinger had never been impressed by the buyers, who had not sent her the documents requested.
In a notice to the TASE today, IDB Development said that Salinger would not approve the sale. JT Capital announced that it would try to persuade her to change her mind, but that if she did not do so by the deal's extended deadline, which is today, it would not exercise its option for another extension until June 20. It will also not deposit NIS 150 million with a trustee, a condition for the second extension.
Elsztain, Ben-Moshe not disappointed
IDB's new controlling shareholders, Eduardo Elsztain and Moti Ben-Moshe, are probably pleased today. They never wanted the deal with JT Capital, which was originally signed by IDB's previous owner, Nochi Dankner. Under the terms of IDB Holding Corp. Ltd.'s (TASE:IDBH) debt settlement, if Clal Insurance was not sold, they would inject an additional NIS 500 million into IDB Development, money which has already been deposited with the settlement's trustee. This money should be enough to meet IDB Development's upcoming NIS 450 million bond payment in June.
The bondholders of IDB Development's previous parent company, IDB Holding, will receive NIS 150 million for the cancellation of Clal Insurance's sale and an additional 20.9% of shares in IDB Development (which are currently held in trust by the settlement's trustees Eyal Gabay and Hagai Ullman). This will increase their stake in the company to 46.7%, compared with the 53.3% the currently hold together with Elsztain and Ben-Moshe.
If Clal Insurance is not sold, and even if IDB Development makes its upcoming bond payment in June, its coffers will be almost completely depleted, and it will it struggle to meet subsequent debt payments. This will make the rights issue, which Elsztain and Ben-Moshe have promised to participate in, inevitable. They have promised to invest up to NIS 800 million in IDB Development through 2016.
To sum up, Clal Insurance is still on the shelf, Moshe Tery is still the Ministry of Finance's trustee for its controlling shares, and anyone who thinks that Elsztain and Ben-Moshe can quickly obtain a control permit for the company is mistaken. This is not a given, and at this stage, a long time will pass before we know if it will happen. They do not seem to be the controlling shareholders that Salinger dreams of.
Published by Globes [online], Israel business news - www.globes-online.com - on June 1, 2014
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