Bank Leumi (TASE: LUMI) will lend Shlomo Eliahu up to NIS 2 billion to partly finance his acquisition of Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL). "Globes" reported that the bank may ask Eliahu for higher collateral for the loan.
Under the terms of the acquisition, Eliahu will acquire Assicurazioni Generali SpA's (BIT: GASI) 69.1% stake in Migdal for €814 million (NIS 4 billion). €125 million has already been deposited with a trustee, which Eliahu is liable to lose if the deal is cancelled.
So far as is known, Eliahu intends to finance the deal with NIS 1 billion in equity and to borrow the rest. He needs NIS 3 billion in credit, which he is mostly obtaining from Bank Leumi, and most of which he intends to repay within three years by selling the stakes of Shlomo Eliahu Holdings Ltd. in Bank Leumi and Union Bank of Israel (TASE: UNON), as well as the life insurance business of Eliahu Insurance Company Ltd., and by drawing dividends from Migdal. He may also sell part of Migdal's operations.
Bank Leumi's demand for increased collateral is because of the 25% drop in Migdal's share price since Eliahu and Generali signed acquisition deal in March 2012. Eliahu has also not yet completed all the necessary preconditions for the deal, beginning with the sale of Eliahu Insurance's life insurance business.
Published by Globes [online], Israel business news - www.globes-online.com - on July 24, 2012
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