Eyal Gabbai, the expert on behalf of the court on IDB, submitted his report on the three proposals for investment in the company to Judge Eitan Orenstin today. According to the report, Gabbai finds the proposal by the Granovsky-Dankner consortium to "embody the greatest certainty". The proposal of the Dolphin consortium headed by Argentinian businessman Eduardo Elsztain is graded "medium", while the proposal by Xtra Holding, headed by Motti Ben-Moshe receives the lowest mark.
"The company has given the highest surety for completing the arrangement, at NIS 624 million, of which NIS 528 million has already been deposited in a trustee account," Gabbai writes, although he adds that the Granovsky-Dankner proposal is partly based on loans, and involves liens that have not been duly disclosed.
Concerning the Elsztain consortium, Gabbai points out that in the ordinary course of business its proposal could run into a cash flow failure at IDB Development before the debt settlement in the group is completed. In addition, he states that the consortium has not provided him with figures supporting the availability and composition of the capital required for its investment, and that if this consortium should win the tender for IDB, it cannot be ruled out that later on it will need to find further investors in order to abide by the amount of the cash injection to which it is committed.
As far as Ben-Moshe is concerned, Gabbai believes that his proposal is the least likely to be completed, and that it involves the highest risk for the creditors, especially in the light of the preconditions set by Ben-Moshe, such as agreement in advance with the banks on criteria for IDB Development. Furthermore, Gabbai points out that the financial statements of Xtra Holding were submitted to him in German and English, and so he was unable to analyse the financial strength of the consortium.
A whole chapter of the report is devoted to the "ticking bomb" in the current saga, namely the cash flow problem of subsidiary IDB Development. "Because of the size of the cash flow challenge facing IDB Development, the settlement cannot be delayed," he writes, adding that at the end of the second quarter of 2014, IDB Development will require a substantial external cash injection, while it does not at present have liquid resources, and the chances of the deal for the sale of its holding in Clal Insurance are not conclusively known.
Accordingly, Gabbai recommends that under the debt arrangement in IDB Holding, at least NIS 650 million should be injected into IDB Development by May 2014.
Furthermore, given the tight timetable for resolving the issues at stake, Gabbai believes that there will be no second opportunity for a debt arrangement in IDB, and he therefore recommends that approval of an arrangement should be conditional upon at least NIS 700 million being deposited with the court or in a trustee account on agreed terms. "That way, the heaviest clouds that put in doubt the proposed arrangements, the question of the sources for implementing them, will be removed."
Published by Globes [online], Israel business news - www.globes-online.com - on November 13, 2013
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