Midroog Ltd. today put the six TASE-listed bonds of IDB Holding Corp. Ltd. (TASE:IDBH) unit Discount Investment Corporation (TASE: DISI) on its watch list because of the higher risk characteristics of its subsidiary Koor Industries Ltd. (TASE:KOR), because of its ongoing weakness of Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ), its main holding, and increased debt.
On Sunday, Discount Investment and its direct parent company, IDB Development Corporation Ltd. extended a NIS 500 million owners' loan to Koor to help lower its debt ratio on the guarantees to Citigroup Inc. (NYSE: C) and Morgan Stanley (NYSE: MS), which lent it the money to buy the Credit Suisse shares. The debt ratio rose because of the plunge in Credit Suisse's share price.
Midroog said that this loan reflected Discount Investment's high involvement and reciprocal relationship with Koor. Discount Investment owns 63% of Koor, and Midroog is therefore considering consolidating Koor's debt with that of Discount Investment.
However, Midroog believes that the completion of the sale of Koor subsidiary Makhteshim Agan Industries Ltd. (TASE: MAIN) to ChemChina at the end of October will greatly improve Koor's liquidity and will therefore ease the company's short-term risk.
Midroog believes that unless Discount Investment's debt ratio improves and if the damage to the credit risk of Koor continues, it will downgrade Discount Investment's rating.
Published by Globes [online], Israel business news - www.globes-online.com - on August 9, 2011
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