The sale of Gadot Chemical Terminals and Tankers Ltd. by Israel Discount Bank (TASE: DSCT) will be able to move forward, after the London Maritime Arbitration Association ruled in the company's favor in the hearing against a Chinese shipyard from which it ordered four ships in 2007. The arbitration awarded Gadot $80 million, which it will receive in a few weeks, and which will reduce its debt and boost its value.
Five years ago, Discount Bank extended Ampal-American Israel Corporation (Bulletin Board: AMPLQ; TASE:AMPL), then controlled by Yosef Maiman, a NIS 320 million loan to acquire Gadot Chemical Terminals and Tankers. Ampal used its stake in the company as collateral for the loan, and the bank foreclosed on the shares when Ampal fell into financial difficulties and could not repay its debts, including NIS 900 million owed to bondholders.
Ampal owes Discount Bank $80 million. After Ampal filed for Chapter 11 bankruptcy protection in the US, the bank offset the company's cash balance against the loan. In November 2012, the bank recalled the remaining $67 million loan. Ampal objected, but, in December, the Tel Aviv District Court ruled in favor of the bank, and appointed a receiver to sell Ampal's stake in Gadot.
In early 2013, Discount Bank hired the Yigal Arnon & Co. law firm to sell Gadot, but buyers waited for the results of the arbitration, which would have a major effect on the company's value. With the ruling in Gadot's favor, Discount Bank can heave a sigh of relief, as the ruling will presumably boost the company's value and improve the chances of a sale at a company value greater than the bank's loan to Ampal. If that happens, the outstanding balance of the sale proceeds will go to Ampal's bondholders.
Published by Globes [online], Israel business news - www.globes-online.com - on July 29, 2013
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