It's hard to resist comparing what has happened this week to Prime Minister Benjamin Netanyhau and to IDB Holding Corp. Ltd. (TASE:IDBH) controlling shareholder Nochi Dankner. At the end of a period of feverish negotiations, each has managed to sign a deal that preserves his status: Netanyahu as prime minister, and Dankner as the man in charge of one of the largest and most influential holding companies in Israel.
Both survived a critical week with no little difficulty, and both from now on will have to live alongside partners they would not have wished upon themselves: Yair Lapid and Naftali Bennett in Netanyahu's case, and in Dankner's, the IDB bondholders, who will become shareholders in the company. Netanyahu and Dankner, the commentators will agree, are setting out on a new path much weaker and more vulnerable than they were in the past.
That is where the resemblance between the two ends. Despite the convolutions of the formation of the coalition, Netanyahu is the person that most Israelis, including his senior coalition partners, want as prime minister. From that point of view, his position is stable and probably secure for the next four years. Dankner, who at the height of his glory was recommended for prime minister by his colleague Ilan Ben-Dov, would probably be glad to sign up for a similar period at the head of IDB.
The outline debt arrangement for IDB agreed this week (which includes a haircut of hundreds of millions of shekels) looks to a bystander to be very shaky. Its completion depends on the fulfillment of several conditions beyond the control of Dankner himself, such as an injection of capital by "the uncle from Argentina" Eduardo Elsztain, which is the basis of the debt arrangement, agreement by the creditor banks, approval by bondholder meetings, and so on.
Even if he succeeds in overcoming these hurdles, and the debt arrangement is approved, the militant bondholders of subsidiary IDB Development are waiting for him around the corner. They are determined to take the company (in which most of the business activity of the concern is concentrated) from him if it fails to meet its massive liabilities.
And what about Dankner's own debt? This amounts to some NIS 800 million of credit that private companies he owns took from Israel's four leading banks in order to enable him to buy his stake in IDB. These companies are currently incapable of servicing the debt. Despite Dankner's good connections with the heads of the banking system, who are not for the present making life difficult for him, this front too is not guaranteed to remain quiet in the future.
All this is well understood by the people at IDB's headquarters, on the 44th floor of the Azrieli Towers in Tel Aviv. Until not long ago, senior managers would kill for a job at IDB, which promised membership of a winning team and very remunerative conditions.
This week, another senior manager in the group, Discount Investment CEO Ami Erel, announced his resignation. He was preceded by members of the Livnat family, and his long-time friend and partner Avi Fisher, who crossed the lines to manage Clal Industries under Len Blavatnik.
According to reports, it was Erel who last year called the situation in which IDB found itself a "perfect storm", are rare combination of severe events with highly destructive consequences.
It's debatable what contribution decisions by IDB itself made to that storm, but one thing is clear: only a perfect storm in reverse, centered on a dramatic positive move on the stock market, will ensure Nochi Dankner an extended period at the top at IDB.
Published by Globes [online], Israel business news - www.globes-online.com - on March 14, 2013
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