"We're seeing a steady erosion in the weak liquidity profile of IDB Development Corporation, reflected in an expected NIS 1 billion cash shortfall in 2014 and a possible breach of the financial covenants on the NIS 2.1 billion bank debt by the end of 2013," says Standard & Poor's Maalot Ltd. in its downgrade of IDB Development's rating by three grades from BB to B. Maalot put the company on its credit watch list in September 2012.
IDB Development is the main asset of IDB Holding Corp. Ltd. (TASE:IDBH), controlled by Nochi Dankner. IDB Development's bond debt totals NIS 4.1 billion, and the B rating reflects an assessment that the debt is a high credit risk, and the "Negative" outlook indicates that a further downgrade is possible.
"Given IDB Development's financial standing, we cannot rule out the possibility that a going concern warning could be attached to the company's financial reports during 2013. This is liable to cause the bondholders to take legal action, and to default, which recently happened to the parent company, IDB Holding," said Maalot.
As for the proposed party at interest deal in which IDB Development will sell to Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) to sister company Koor Industries Ltd. (TASE:KOR), Maalot says, "Although this is a positive development from the perspective of IDB Development's creditors, given the fact that this is a parties at interest deal and the current public environment, we believe that approval of a deal faces a very difficult approval process."
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2013
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