The decamping of Argentinian businessman Eduardo Elsztain from the debt arrangement in IDB is another stage in the deterioration in the business position of the group's controlling shareholder Nochi Dankner, and it could turn out to be the last straw in his long survival battle to stay in control.
Although the consensus on the capital market is that Elsztain's departure represents a mortal blow to his efforts, Dankner himself refuses to surrender. Today, he set out another proposal for a debt arrangement in the group, with a huge cash injection the source of which is not clear, and is probably not known to Dankner himself.
The truth is that Dankner has no choice: he is fighting with every weapon he has, and perhaps with some that he does not have, for his home, in every sense. Even if it is insolvent, IDB is the only substantial asset that Dankner holds, and the only source from which he will be able in the future to service the huge private debt (almost NIS 1 billion) he took on through privately held companies Ganden and Tomahawk.
As far as Dankner is concerned, losing the battle for control of IDB means not just the loss of his life's work and of the status he has acquired in the business community over the years; it is also likely to entail the loss of his private assets, including the home in which he lives, as a result of legal proceedings that IDB's creditors have instituted, and will institute.
A similar fear of lawsuits is almost certainly what lay behind the decision of the Livnat and Manor families, Dankner's partners in the controlling interest in IDB, to return to the company money they had drawn as dividends in the past.
Not yet the last word
Dankner's long struggle to retain control of IDB would have come to an end, were it not for the fact that the various creditors local and foreign banks and bondholders at different levels of the pyramid - to which the largest group in the Israeli economy owes some NIS 9 billion, have different interests.
It has been clear for a long time that most of IDB's creditors "sinned" by granting bad credit with almost worthless collateral. With the collapse of the holding companies, it is obvious to most of the creditors that it will be well-nigh impossible to recover the bulk of the credit given. Whereas in IDB Development, in which the operational assets are concentrated, the position is fairly good, it worsens the higher you go up the pyramid, in IDB Holding, Ganden, and Tomahawk, where there is practically no collateral for the creditors.
This is the reason that most of Dankner's creditors have so far waited patiently, despite the grave doubts about the chances of the constantly changing proposals that he and Elsztain have put forward in the past few months. Even now, when Dankner looks closer than ever to losing control of IDB, his creditors, chiefly the banks owed money by the companies at the top of the pyramid, are far from formulating a solution to the debt problem.
With or without Dankner, we probably face long months full of crises and emotion on the way to the de-facto break-up of the concern. In almost every conceivable scenario we can expect a sell-off of its main assets. The stage after the fragmentation of the Dankner empire is a fight over repayments of the billions of shekels of debt who comes first, and who gets more.
Published by Globes [online], Israel business news - www.globes-online.com - on July 7, 2013
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