The representative of IDB Holding Corp. Ltd. (TASE:IDBH) bondholders yesterday reached a debt settlement with its controlling shareholder, Nochi Dankner. The bondholders will receive NIS 235 million when the agreement is signed through a capital injection by the controlling shareholders. The bondholders will receive an additional NIS 40 million in installments over several years for a total of NIS 225 million.
The capital injection, and the fate of the settlement, depends on a deal with Eduardo Elsztain.
The bondholders will also receive 15% of IDB Holdings shares, with a current value of NIS 80 million. Dankner will keep control of the company.
The bondholders will also receive four new bond series, totaling NIS 1.5-1.6 billion, bearing 2-5% annual interest and linked to the Consumer Price Index (CPI). Principal repayments on the new bonds will be made from the fifth year (beginning from the sixth year) of the settlement, and continue for seven years; in other words, twelve years from now.
IDB's controlling shareholders injected NIS 40 million into the company through 2012 against the settlement.
Immunity from future legal claims
The bondholders representative will give IDB's controlling shareholders and executives immunity from future legal claims, if Dankner succeeds in bringing in Elsztain and injecting capital into the company. The immunity will cover IDB's other controlling shareholders, the Manor and Livnat families, from whom the bondholders expect to receive pari passu.
Sources at the bondholders representative say that bondholders who keep IDB Holding's new bonds until their maturity will not see a nominal haircut. The parties have agreed on the business section of the settlement, but there are still some issues of corporate governance, cost cutting, and guarantees to settle.
IDB's bondholders will now have to vote on the settlement at a general meeting.
The bondholders also have to wait for Elsztain to decide whether he will inject $75 million into Ganden Holdings Ltd. (through which Dankner controls IDB). Most of this money will go to the bondholders. This matter has not been settled with Bank Leumi (TASE: LUMI), a creditor of Ganden.
A source close to the deal said that the settlement was fair and without a nominal write-off. "Nochi made the effort, and we see it," he said.
Sources at IDB say that the barriers have been lifted to Elsztain's follow-on investment, which is due within days. The sources believe that the company has received enough time to deal with the group as a whole. IDB Holding currently has NIS 190 million in cash.
Earlier this week, IDB's bondholders rejected an initiative by Dankner to extend Elsztain's option to invest $75 million in Ganden.
Published by Globes [online], Israel business news - www.globes-online.com - on March 12, 2013
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