IDB Development Corporation Ltd. (TASE:IDBD) and its Discount Investment Corporation (TASE: DISI) subsidiary today reported large 2016 profits, signaling the beginning of the group's recovery last year. IDB Development finished 2016 with a NIS 262 million net profit, following a NIS 360 million loss in 2015. The sale of IDB Development's 40% minority holding in sub-subsidiary Adama Agricultural Solutions Ltd. (TASE: ADAMA), which was completed in the fourth quarter of 2016 and generated a NIS 524 million profit for IDB Development, accounted for the holding company's good results.
The sale of the Adama stake and an increase in the value of other assets boosted IDB Development's equity to NIS 838 million, as of the end of 2016, compared with NIS 131 million at the end of the preceding year. The group's net asset value totaled NIS 1.12 billion as of the end of 2016, and its debt rating was recently raised three levels to BB.
These developments led the group's auditors to remove the going concern qualification they attached to its financial statements in recent years, when IDB Development's business and finances went into a tailspin. The auditors still stress, however, that the company must repay NIS 1.55 billion in debt by November 2019, which will depend on its ability to carry out its plans, and on the proceeds it receives by that time from the sale of its 55% holding in Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS). This debt is the result of IDB Development's success in recent months in raising the huge sum of NIS 1.53 billion in three bond series, secured by liens on its two main assets (shares in Clal Insurance and Discount Investment). These bond issues enabled the company to repay old loans and release the guarantees made for them.
IDB Development plans to complete this year the repayment of all the private loans it previously received from banks and financial institutions, leaving the holders of its various series of bonds as its sole creditors.
Discount Investment will distribute a NIS 694 million dividend
As of now, IDB Development has NIS 839 million in cash, while its debt repayments scheduled for this year total NIS 726 million. The company is due to pay its creditors NIS 599 million more in 2018, but it has several other possible resources for making these payments.
One of its main resources is the NIS 694 million dividend declared today by Discount Investment, when it reported a NIS 950 million net profit in 2016, due mostly to the sale of its minority holding in Adama to Chemchina. The dividend will be paid in two installments: one in April and one in September.
At the same time, Discount Investment believes that the net amount leaving the company coffers will be only NIS 410 million, because the remainder will return to the company through the exercise of the options possessed by its shareholders. IDB Development, which owns 68% of Discount Investment, has already announced that it will distribute a NIS 481 million dividend, but NIS 210 million of this will be used to fully exercise its Discount Investment options. The exercise of these options will give IDB Development 25.7 million more free shares in Discount Investment, and enable it to later expand its L bond series, which is secured with a lien on Discount Investment shares. This is the second source likely to help IDB Development repay its debt next year. Furthermore, IDB Development expects to receive NIS 163 million this year from the sale of Israir Airlines and Tourism Ltd., its sub-subsidiary, to El Al Israel Airlines Ltd. (TASE: ELAL) subsidiary Sun D'or. Next year, IDB Development may sell its 50% share of its IDBG real estate business in Las Vegas to its partner, Property and Building Ltd. (TASE: PTBL).
Following the publication of its reports, IDB Development and Discount Investment held an investors conference attended by all the group's senior officeholders and managers of the two companies' subsidiaries. IDB Development and Discount Investment CEO Sholem (Saul) Lapidot said at the conference, "We had a wonderful year. 2016 was a turning point in the activity of the group's companies. For us, this means that IDB Development was, and still is, Israel's leading investment group, affecting the day-to-day lives of all Israelis." Lapidot added, "The sale of Adama was extremely important for us. In addition to the payment we received, we have also consolidated the mutual appreciation and relationship with Chemchina chairman Ren Jianxin. We think that this can also help us later," thereby hinting at the possibility that the giant Chinese corporation may take an interest in the acquisition of Clal Insurance.
Published by Globes [online], Israel Business News - www.globes-online.com - on March 23, 2017
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