"IDB's offer not even a basis for talks"

Bondholders have given the cold shoulder to the troubled holding company's debt rescheduling proposal.

On Sunday, IDB Holding Corp. Ltd. (TASE:IDBH), controlled by chairman Nochi Dankner, submitted its offer for a debt settlement to the company's bondholders, who have given it the cold shoulder. IDB's share price fell 2.7% yesterday, and its bonds fell by up to 2.9%, to prices reflecting junk bond yields of hundreds of percent.

IDB asked its creditors to reschedule payments by 5-15 years in exchange for a NIS 180 million capital injection by Argentinian billionaire Eduardo Elsztain (in addition to the NIS 40 million he has already injected into the company). IDB offered to replace the company's current NIS 1.8 billion debt with three new bond series of NIS 650 million each, with the same nominal value, and bearing 2-4% interest and maturing in up to 15 years.

IDB also offered to let the bondholders share in future upside, if the aggregate value of the company's main holdings Shufersal Ltd. (TASE:SAE), Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Makhteshim Agan Industries Ltd., Property and Building Ltd. (TASE: PTBL), Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), and Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ) should rise by more than 50% (a phantom option).

IDB CEO Haim Gavrieli and other executives presented the offer to the bondholders' representatives at its offices in Tel Aviv's Azrieli Towers.

Not a serious offer

IDB's offer was received with anger by the institutional bondholders. A spokesman for the trustees and bondholders said, "IDB Holding's offer for a debt settlement is unacceptable to us, and regrettably is very far from a fair settlement that would be good for the debt holders. We call on the company to come to the negotiating table with a completely different way of thinking, so that we can move forward on a path to a settlement and not go down other roads."

Gilad Pension Fund general director Yoav Armoni and one of the bondholder's representatives said, "The offer is not even a basis for negotiations. There is nothing in it, and we are familiar with reasonable, worthy, and fair settlements, which give something to the debt holders and repay the debt to them. We're talking about the public's pensions. There is no question, the debt must be repaid."

Armoni added, "In any debt settlement, there is a contribution by the owners, which includes an equity component and part of the company is transferred to the ownership of the creditors, and the haircut is as small as possible. This offer has none of these. There's an offer to greatly extend the bonds' duration, and the interest proposed its quite low, as if this were a risk-free company and a company with no problems.

"The offer is ludicrous to the point of being unworthy of discussion. In exchange, they are offering a phantom mechanism, which I don’t think is appropriate. It's simply irrelevant. With every such offer, my confidence diminishes. This isn't the kind of proposal you make to bondholders. The offer is simply not serious. We will fulfil our duty to our members in the old Gilad pension fund."

Commenting on Dankner, another investment institution executive involved in IDB's contacts with its bondholders, said, "There is no other explanation; this looks as if he too concludes that there is no way to continue servicing IDB Holding's debt. Not only does he not compensate the bondholders for extending the repayments, he will give less. He is offering the institutions both a postponement in repayments with a substantial grace period, and he is fining them with the interest rate."

Another source said, "On the face of it, the proposal is impossible. Even the ostensible compensation is in the future, and subject to an upside, which may never happen. The proposal is unacceptable as is."

Published by Globes [online], Israel business news - www.globes-online.com - on January 8, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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