IDB Holding Corp. Ltd. (TASE:IDBH) bondholders are not the only ones exposed to the company; Israeli banks are too. The total bank debt of IDB Holding its wholly-owned subsidiary IDB Development Corporation Ltd., and its parent company Ganden Holdings Ltd., is estimated at NIS 2.7 billion. However, the banks are unlikely to make massive write-downs for problem debt, because they have already done so in the past few quarters.
Most of the debt - NIS 2 billion - is owed by IDB Development, which is in better shape than the other two companies, and is not the subject of a going concern warning.
Ganden, the private company through which Nochi Dankner controls IDB, owes the banks NIS 600 million (NIS 500 million to Bank Leumi (TASE: LUMI) and NIS 100 million to Mizrahi Tefahot Bank (TASE:MZTF). IDB Holding's bank debt is NIS 130 million, and IDB Development's is NIS 2 billion, most of which is owed to Bank Hapoalim (TASE: POLI).
Even after the provisions made by the banks, the Bank of Israel continues to closely monitor the credit granted to the IDB group. Bank of Israel sources stress that the banks' exposure to IDB is different from the bondholders' exposure, both in the types of companies that received the credit, and in the collateral obtained against the debts.
Two weeks ago, "Globes" reported that, in an extraordinary step, Supervisor of Banks David Zaken instructed the banks to classify IDB's debt as problem debt. The debt classified as problem debt is the credit granted to holding companies at the apex the business pyramid, not credit granted to the subsidiaries, such as Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Shufersal Ltd. (TASE:SAE), or Koor Industries Ltd. (TASE:KOR), which account for most of the IDB group's bank debt.
The banking system has three classifications of problem debt: credit risk under special supervision; substandard credit risk; and impaired credit risk. The Bank of Israel instructed the banks to classify IDB's debt as impaired debt, the classification with the highest risk.
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2012
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