IDB bondholders seen doubling Discount Investment price

Eduardo Elsztain
Eduardo Elsztain

Discount Investment, which Eduardo Elsztain strove to keep, is estimated to be worth much more than its current market cap.

Last Friday, after just seven years, Eduardo Elsztain lost control of holding company IDB Development. This was after investing some NIS 3 billion through his companies IRSA and Dolphin in an attempt to stabilize the DB Development-Discount Investment pyramid, in which IRSA and Dolphin hold 84% of the shares. On Friday, Tel Aviv District Court Judge Hagai Brenner handed down an order to open proceedings against IDB Development as well as an order for its liquidation, after ruling that the company was insolvent. At the same time the judge appointed Adv. Ophir Naor as trustee of the company. The judge also agreed to the request of the trustees of the 14 and 15 series secured bondholders to appoint provisional receivers for 70% of the shares of Discount Investment Corporation (TASE: DISI) and 5% of the shares of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), which on which the bondholders hold liens. The company also has 9 series bonds that are not secured. IDB's total debt to its bondholders is some NIS 2 billion.

IDB has three more assets designated for sale - 100% of airline Israir, 24.8% of real estate company IDBG, and a holding in oil and gas exploration partnership Modi'in. Discount Investment, the main asset in the group, holds controlling stakes in Property and Building Ltd. (TASE: PTBL), Cellcom, Mehadrin Tnuport Export LP (TASE:MEDH), Elron Electronic Industries Ltd. (TASE: ELRN), and Epsilon Investment House Ltd..

Following the court decision, Elsztain was ousted as chairman of IDB. Other directors and company officers were also dismissed, among them CEO Aaron Kaufman, CFO Haim Tabouch, company secretary Larisa Cohen, and directors Mario Blejer, Giora Inbar, and Saul Zang.

Adv. Alon Binyamini and Adv. Raanan Kalir, attorneys for the trustee of the 14 series bond, were appointed as receivers of the 70% holding in Discount Investment, while Adv. Adi Figel, attorney for the trustee of the 15 series bond, was appointed receiver for the 5% holding in Clal Insurance. Incidentally, according to market sources, Elsztain could try to try to repurchase control in Discount Investment, if an auction is held of the controlling holding, in order to reduce the losses he ahs sustained.

In yesterday's trading, Discount Investment's share price rose 15%, and its market cap is now around NIS 760 million. At the same time as finding buyers for the shares in Discount Investment and Clal Insurance, the trustee will also have find buyers for the IDB group's unencumbered assets, chiefly 12% of Discount Investment, 100% of Israir, 25.8% of IDBG, and the holding in Modi'in.

Market sources say that the shares in Discount Investment (mortgaged and non-mortgaged) will probably be sold to the highest bidder in an open auction. The same sources say that since on the whole the company has good assets, particularly 74% of Property & Building and 45% of Cellcom, the shares in Discount Investment could be sold at a company valuation of NIS 1.3-1.5 billion, double the current market cap or more.

Another market players told "Globes" that at IDB Development, administrative and general expenses, which amount to some NIS 30 million annually, could be cut dramatically, at the same time as realizing the company's main assets. "Now, each deal can be examined on its own terms, while maximizing the benefit and return to the bondholders. All along, Elsztain strove to secure some kind of exclusivity on offers for the shares in Discount Investment, while the bondholders acted to extract Discount Investment from IDB Development's grip, because they estimated that they would be able to obtain a great deal more for the shares in Discount Investment than Elsztain could or would offer them. Discount Investment is clearly worth much more than its current market cap."

Published by Globes, Israel business news - en.globes.co.il - on September 30, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Eduardo Elsztain
Eduardo Elsztain
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