Real estate developer Nidar Construction and Development Ltd. (TASE:NIDR), has lodged a petition for a 90-day stay in proceedings with the Jerusalem District Court. The company's request reveals that it has debts totaling NIS 350 million, of which NIS 147 million is owed to the banks, NIS 77 million is in straight bonds and NIS 69 million in convertible notes.
The court granted Nidar, which is controlled by the Rachmin family, a stay in proceedings until the next hearing at 10:00am on August 3. Nidar stated that it was experiencing cash flow difficulties and that the value of its property portfolio exceeded its collateralized liabilities.
The petition for the stay in proceedings was also requested for the controlling shareholders - the Rachmin brothers - who are guarantors for the company's debt to banks and its other creditors. Bank Hapoalim, to which Nidar owes NIS 35 million, was quick to file an injunction against the petition, since it holds liens on properties which it is seeking to exercise separately. The bank's lawyer, told the court that if the stay in proceedings did not include the properties that it has liens on, it would not oppose the petition.
Nidar said in its petition that it had properties worth a total of NIS 309 million, and that therefore it was not insolvent, was not dependent on external financing, and that the extent of its leverage was not unreasonable. The company claimed it needed a timeout to restructure its operations and improve its cashflow, and that it could be turned around by bringing in an investor or selling its assets.
Nidar appended to its petition a draft business plan to enable it to continue operating while the stay of proceedings is in force, and asked to appoint Adv. Amir Bartov as a trustee. The company said its controlling shareholders were willing to bear the cost of operating it in the interim (which it estimates at NIS 250,000 a month), and cover any current deficit generated during this time.
Trading in Nidar's shares was suspended last week after the company notified the TASE that the company's controlling shareholders could not meet their liabilities to it and to its bondholders. The company's share has fallen 86% in the past year to give it a market cap of just NIS 22 million.
The Rachmin brothers said they had injected NIS 25 million (in the form of an owners loan) into the company since August 2007, NIS 18 million of it in 2008 alone. They are also claiming NIS 7 million for unpaid management fees and compensation, as well as other expenses which they assumed instead of the company.
Despite having an asset portfolio that exceeds its liabilities Nidar claimed in its petition that its cash flow and projected revenue stream had been adversely affected by four key events. First of these was the losses it incurred on its projects in Modiin and Cochav Hatzafon, where apartment prices were linked to either the Consumer Price Index (CPI) or dollar, rather than the Building Inputs Index, coupled with the change in government policy on the employment of foreign workers.
The second contributing factor, according to Nidar, was its undertaking to Bank Leumi not to increase the extent of its bank and non-bank, which added to its cashflow difficulties. The third factor was the slowdown in the local and global real estate markets, which had resulted in a drastic drop in the number of deals and unforeseen overruns in timescales for projects in progress. Another factor listed by Nidar in its petition was the default in payment for property by several parties due to a NIS 9 million attachment on their assets.
Published by Globes [online], Israel business news - www.globes-online.com - on July 28, 2008
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