IDB Holding Corp. Ltd. (TASE:IDBH), controlled by chairman Nochi Dankner and the company's bondholders are headed for court, which could set off a chain reaction for Israel's largest conglomerate, indicates an investigation by "Globes" of the vote by the company's major bondholders. The investigation found that a majority of the large financial institutions which hold IDB bonds voted for the bonds' trustees to petition the court for an immediate injunction to block an upcoming bond payment. The trustees will likely file the motion tomorrow.
At 1 pm, the bondholders voted on a pending NIS 35 million payment on IDB's Series B bond. After IDB attached a going concern warning to its financial report for the second quarter on Friday, the bonds' trustees yesterday met, because the warning, by definition, raises doubts about the company's ability to meet its debt payments. Holders of IDB's other bonds fear that any reduction in the company's current NIS 200 million in cash could reduce future payments to them in the event of a future debt settlement or liquidation.
In other words, most of IDB's bondholders consider the upcoming payment on the Series B bond, which accounts for only a small part of the company's total NIS 1.7 billion bond debt, would mean preferential treatment of certain bondholders.
The trustees stated on the ballot that the decision to seek legal action would not come into effect under one of the two following circumstances: if by 9 am tomorrow, IDB announces that it will not make Thursday's bond payment on the Series B bond; or if the payment is made with external funds, a proposal that the trustees made to Dankner last week.
Sources inform ''Globes'' that, in the past two days, the financial institutions held talks with Dankner, and that they were prepared to accept a NIS 35 million personal guarantee from him for the upcoming bond payment, but that Dankner rejected the offer.
The CEO of one of the financial institutions told "Globes" today, "We tried to negotiate a solution with the controlling shareholder. The responsibility is on both of us, which is why we held responsible talks behind closed doors. He has received substantial maneuvering room from us, but he decided not to use his personal sources, which we consider as a lack of commitment to the process on his part."
Published by Globes [online], Israel business news - www.globes-online.com - on September 4, 2012
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