Excellence Investments Ltd. (TASE: EXCE) slams the debt settlement for Tao Tsuot Ltd. (TASE: TAO-M) proposed by controlling shareholder Ilan Ben-Dov. Sources inform ''Globes'' that, a few days ago, the investment house told Tao, Ben-Dov, and Tao chairman Shlomo Nass an unequivocal message that they must improve the proposal.
"Ben-Dov is not doing a favor," Excellence CEO David Baruch told "Globes". "No investment institution will accept a 60% haircut. It is unacceptable, and not even an opening position for negotiations. The relationship with Ben-Dov is broader, and he should take into account that he will pay a hefty price. He should come back with a real offer."
Excellence clearly and sharply ties Ben-Dov's backing of Tao's bonds and the bonds of Scailex Corporation (TASE: SCIX; Pink Sheets:SCIXF) and its subsidiary Orange franchisee Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR). "Ben-Dov is offering us a 60% haircut by claiming that it better than nothing. That is something you can say if you have only one company, but not when you have a stable relationship with the capital market. This is liable to boomerang against him.
"Ben-Dov has NIS 3 billion in the capital market, and he should do something serious to rebuild confidence in him. He ought to end this tale, because at some point Scailex (through which Ben-Dov controls Partner) will have to recycle debts."
Baruch says controlling shareholders should stand by their commitments. "Anyone who tries to hide behind the dry rules of the Companies Law and of a limited company will find that it won't work. When a businessman uses his reputation to raise money, he is building unwritten trust with the public. The other side of the coin is meeting commitments.
"Anyone who wants to operate in the capital market should stand behind his companies and put his hand into his pocket. Otherwise, he won't be allowed to operate in the market. Beny Steinmetz and Lev Leviev understood this. I wouldn’t advise any large borrower to think that the starting line is 2007. The environment has changed since then, and norms have been set. Borrowers in a dilemma should take some friendly advice - don’t make mistakes, they will cost you."
Baruch added, "Ilan Ben-Dov has built an empire. He operates in key sectors of the economy, controls a company that is an anchor of the capital market, the market gave him his chance, and allowed him to take over Partner. That's binding. True, Tao was always risky, and buyers should price the risks, but above all, there is a moral contract."
Ben-Dov reportedly did not anticipate the sweeping resistance to his proposed debt settlement and was surprised by the fury over it. An associate said, "He is under heavy pressure. He is worried and hurt by the media attacks against him."
Ben-Dov's aides suggest postponing the Tao bondholders meeting scheduled for Thursday, in order to prepare a new settlement structure that will meet the financial institutions' demands. However, some bondholders have said that they oppose a postponement.
The bondholders have not yet appointed a representative. Most of Tao's bondholders are from the general public, and are not investment institutions. Institutions with Tao bonds include Excellence, its parent company The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS).
Clal Insurance may prefer no bondholder representative, because its controlling shareholder IDB Holding Corp. Ltd. (TASE:IDBH) also controls Partner rival Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL). This would make Excellence the lead investment institution, but is not one of the larger bondholders. It owns NIS 7 million in Tao bonds (nominal value), and none of its provident funds or investment portfolio has holdings in the company.
"A debt settlement by Tao is no big deal for Excellence's return, because the size of the investment in Tao is small," says Baruch. "But there are large holdings in other Ben-Dov companies."
Published by Globes [online], Israel business news - www.globes-online.com - on July 19, 2011
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