IDB Holding Corp. Ltd. (TASE:IDBH), controlled by Nochi Dankner, continues to battle its bondholders on two fronts. On one front, IDB Holdings yesterday made an improved offer for a debt settlement, while subsidiary IDB Development Corporation held a stormy bondholders meeting this morning.
IDB Holding made its third offer for a debt settlement, after the bondholders rejected the two previous offers out of hand, and there now seems to be some rapprochement between the sides. However, a source close to IDB's bondholders' representative said today that the new proposal was far from meeting the requirements of the representative's members - Excellence Investments Ltd. (TASE: EXCE), Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), and Gilad Pension Fund.
IDB Holding's new offer includes increasing the immediate capital injection into the company by NIS 50 million, and bringing forward a NIS 10 million payment to the date of the settlement, which will bringing the total immediate injection to NIS 200 million. The company is also offering the bondholders an increase in the equity component amounting to an additional 5% of IDB Holding's shares, which will give the bondholders 15% of the company. The company also proposes reducing the new bond issue from NIS 1.4 billion to NIS 1.25 billion and raising the interest rate from 4% in real terms to 4.5%.
A source close to the bondholders' representative said, "The improve offer is not good enough. If IDB were to put the same effort into the offer as it puts into its spin about Eduardo Elsztain's investment, the bondholders' situation would be much better."
IDB Holding has NIS 190 million in cash.
The previous offer, submitted by IDB Holding to the representative on January 23, including a NIS 600 million write-off on the company's NIS 1.8 billion bond debt, an immediate capital injection of NIS 140 million into the company from Elsztain's money (he has an option to invest $75 million in Ganden Holdings Ltd., through which Dankner controls IDB).
IDB Development is insolvent
At IDB Development's bondholders meeting, Eli Mizroch of TASC Strategic Consulting, which examined the company's financial situation for the bondholders' representative, said "In TASC's opinion, IDB Development is insolvent."
Mizroch said that, in terms of IDB Development's cash flow, and in the current circumstances, the company will be in breach of its covenants from the second quarter of 2013, and from the third quarter, it will not be able to repay its financial debts. He believes that even if the company completes the sale of its direct holding in Koor Industries Ltd. (TASE:KOR), and sells control of Clal Industries and Investments Ltd. (TASE: CII), the breach of the covenants will be delayed by one quarter, and the inability to repay the debts will be postponed to the first or second quarter of 2014.
Mizroch said that in terms of IDB Development's balance sheet, the company current debt-to-asset ratio is only 73%, giving a negative assets balance of NIS 1.6 billion. He estimates that the company will present a ratio of 100% or more only if all its holdings rise in value by an average of 45%. He said that the company had many excellent assets, but that if it were to sell all of them now, it would not be able to meet all its debts, which are spread through 2025.
TASC said that the sale of the subsidiaries of Discount Investment Corporation (TASE: DISI) would not serve IDB Development in the foreseeable future, because the balance of profits available for distribution by Discount Investment is deeply negative.
As for reports that IDB Development is trying to sell part of its holding in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) to a foreign investors, it should be remembered that in September 2012, the Ministry of Finance reduced the number of control shares free of liens that IDB must hold in Clal Insurance to 45% of its capital through March 2015.
This means that, excluding the shares used as collateral for the loan obtained from Menorah Mivtachim Holdings Ltd. (TASE: MORA), IDB can now quickly sell up to 6% of Clal Insurance, a block of shares that is currently worth just NIS 196 million.
Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2013
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