IDB Holding Corp. Ltd. (TASE:IDBH) controlling shareholder Nochi Dankner is asking the company's bondholders to consent to a delay payments on its bonds by up to 15 years. IDB and its bondholders have begun talks to reschedule the debt payments, and Dankner proposed to the bonds' representatives to reschedule the payments gradually over a long period in exchange for a higher interest rate.
A source at IDB confirmed the report, saying, "This is indeed the structure offered to the bondholders. We're not talking about a haircut, only a postponement."
IDB Holding's financial debt totaled NIS 2.05 billion at the end of September 2012, of which NIS 1.75 billion is owed to the bondholders, and rest to Bank Leumi (TASE: LUMI) and Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ). The company has five bond series, which mature between the end of 2014 and 2020, and it wants to reschedule the debt to begin repayments in five years, and make them over fifteen years.
IDB offered to the bondholders' representatives (Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Excellence Investments Ltd. (TASE: EXCE), and Gilad Pension Fund) to issue three new bond series bearing an interest rate of 3-4%. The company also proposes that Dankner should inject NIS 180 million into the company, financed by Argentinian billionaire Eduardo Elsztain's investment in IDB's parent company, Ganden Investments Ltd.
The main obstacle to a comprehensive debt settlement at IDB Holding, which has a going concern qualification attached to its financial reports, is that its bank loans have different durations and maturities from the durations and maturities of its bonds. Although the interest payment on the Series D bond was postponed from December 2012 to the end of March 2013, and the other bondholders agreed that they will only be paid from external sources, IDB pays the quarterly interest payment to Credit Suisse from the company's cash reserves, which total NIS 200 million. The quarterly interest payment is NIS 2.6 million. The previous payment was in December, and the next payment is in February.
The two upcoming principal payments on the bank loans, totaling NIS 66 million, are due in May 2013. IDB is also due to pay NIS 225 million on its Series C and E bonds a month later. If IDB can reach an arrangement with its bondholders, and Elsztain exercises his option to invest in Ganden, IDB should have enough cash to meet these payments.
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2013
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