The representative body of the IDB Holding Corp. Ltd. (TASE:IDBH) bondholders is proposing a plan to controlling shareholder Nochi Dankner that could solve the problem of the NIS 65 million interest payment due on December 20. According to the proposal, the bondholders will agree to postponement of the payment until March, and, in return, Dankner will undertake to inject NIS 120 million into IDB if Eduardo Elsztain exercises his option to inject a further $75 million into Ganden, the private company via which Dankner controls IDB, following his initial investment of $25 million. IDB is Israel's largest holding company.
Dankner travelled to Argentina yesterday to meet Elsztain and discuss the exercise of the option with him. In September, Elsztain invested $25 million in Ganden. NIS 35 million were transferred to as payment to holders of IDB's B bond. Elsztain holds an option to raise the investment to $100 million in exchange for a 30% stake in Ganden.
Yesterday, a meeting was held by IDB bondholders as part of the threat by the investment institutions to instigate liquidation proceedings. The institutions are demanding that the NIS 65 million interest payment to the D bondholders should come from external sources and not from IDB's cash. IDB opposes this, and argues that it is not insolvent.
"The summoning of the meeting… in current circumstances is an unnecessary, unreasonable, and groundless step," IDB said in a notice to the Tel Aviv Stock Exchange yesterday, adding that "such a step directly harms the company's financial strength."
The company has proposed that it should transfer NIS 21 million to a trustee in order to maintain the "principle of equality" and avoid the appearance of preferential payments to creditors. It also proposes that Ganden should undertake to transfer money to IDB if Elsztain injects further cash into it.
At yesterday's bondholders meeting, some private bondholders attacked the institutions. About 80% of IDB's bond debt (at nominal value) is in the hands of private investors. Some of these complained at the meeting that they did not know what the true interests of the institutions were, and that at least one institution was acting under a conflict of interests. One investor said that there was a certain institution that was suffering from withdrawals from its funds, and that it was therefore convenient for it to divert attention to something else, its battle with IDB.
Separately, S&P Maalot released an update of IDB's credit rating today. Although it was technically an upgrade, the report had a negative effect on the market, and IDB securities fell today. The cause was apparently the content of the report, which stated, "Given the company's shaky financial standing, and as evidenced by its minimal liquid sources in the face of a financial debt of NIS 2 billion, we believe that the company is in clear and immediate danger of default, whether as a result of failure to meet one or more of its commitments on time, or whether as a result of entering into a debt arrangement with its creditors."
Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2012
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