The representative body of the IDB Holding Corp. Ltd. (TASE:IDBH) bondholders has turned its back on Nochi Dankner, and has withdrawn from the outline arrangement formulated with Argentinian businessman Eduardo Elsztain, in favor of joining forces with the representatives of the IDB Development bondholders. The implication is that Dankner will lose control of IDB.
After long discussions, on Friday morning the IDB Development bondholder representatives, headed by Jeremy Blank of York Capital and Hagai Badash of Psagot, reached an agreement with the representatives of the IDB Holding bondholders, headed by Uzi Danino of Excellence and Yoav Armoni of the Gilad Fund, whereby Dankner's pyramid will be flattened, IDB Holding, the top level company, will be delisted, and instead there will be one holding company, IDB Development.
44% of the bond debt of IDB Development, that is, NIS 1.75 billion, will be written off through conversion to 100% of the shares in the old-new company, with the shares being divided up as follows: IDB Development bondholders will receive 90% of the shares, with the remaining 10% going to the bondholders of IDB Holding. In other words, the bondholders seek to oust Dankner from control of the company and take it over themselves.
Both bondholder representatives intend to bring the arrangement to the court for approval. If it is approved, York Capital will become the largest shareholder in the company.
Under this proposed arrangement, the IDB Holding bondholders will be left with the company's NIS 185 million cash, which will be used to repay the debt owing them. They will be given 15% options on shares in IDB Development, and will be issued with two bond series totaling NIS 400 million.
The teaming up of the two groups comes a week before the hearing in the Tel Aviv District Court on the debt arrangement that the IDB Development bondholder representatives are attempting to impose on the company, which will put Dankner in an awkward position, since he will face a united front of the bondholders of the companies at the top of his pyramid.
The bondholders however face a long battle, both with Dankner, and with the banks. It is not clear under the proposed arrangement what sort of haircut the banks will have to sustain, and what they will receive in exchange.
IDB Holding and IDB Development have a combined debt of NIS 8 billion. The largest creditor bank is Bank Hapoalim (TASE: POLI), to which IDB Development owes NIS 750 million, and it can be expected to negotiate hard to recover the debt.
Bank Leumi (TASE: LUMI), which just over a month ago, because of public pressure, withdrew from a plan to write down NIS 150 million owed by Ganden, the private company through which Dankner controls IDB Holding. Leumi is owed NIS 400 million by Ganden, and NIS 160 million by IDB Development.
Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2013
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