Ormat owners struggling with debt

The Bronickis seek an investor to repay Bank Hapoalim, while they retain control.

The struggle for control at geothermal power company Ormat Industries Ltd. (TASE: ORMT) may be heating up again. Ormat CEO Yehudit Bronicki and chairman Yehuda Bronicki, who own 35% of the company through Bronicki Investments Ltd. are seeking a financial investor to buy 10% of the company from then.

Capital market sources believe that the Bronickis will use the proceeds to repay the NIS 600 million they took from Bank Hapoalim (TASE: POLI) in 2007 to buy 7.6% of Ormat to stave off a takeover attempt by Chaim Katzman through Gazit Inc. (TASE: GZIT). Gazit owns 15.17% of Ormat.

Top capital market sources, knowledgeable about the matter, predicted that the Bronickis would find an investor within two weeks. A source close to Ormat said that the Bronickis are seeking an investment company that will sign a control agreement with them, which will keep the de facto controlling rights in their hands, even though their stake would fall to 25%.

A capital marketsource said, "Gazit is worried about developments at Ormat."

Ormat told "Globes" in response, "The company knows nothing about this."

It seems that the Bank Hapoalim loan the Bronickis took in December 2007 to fight off Katzman is liable to be much higher than they planned. It could even reignite the struggle for control of the company. As collateral for the loan, the Bronickis gave the bank a lien on their entire stake in Ormat. The stake is currently worth NIS 1.18 billion. If they cannot repay the loan, Bank Hapoalim, they could lose half their holding in the company, leaving it open to another takeover attempt.

The Bronickis' problem is their dividend income from Ormat, which has totaled just NIS 65 million since 2005, barely a tenth of their loan from Bank Hapoalim. The Bronickis effort to find a financial, rather than a strategic partner, suggests that they are seeking to get cash for part of their holding.

Ormat's share price rose 0.3% today to NIS 28.66, giving a market cap of NIS 2.29 billion.

Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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