"I lost IDB because they set me a trap in order to steal the company," Eduardo Esztain has told "Globes" in an exclusive interview, in which he attacks his rivals and insists he won't give up the fight to regain the company.
He said, "I became a victim of extortion by some of the bondholders. They aren't speculators but simply swindlers. In Israel it's a sport to rob tycoons of their companies.
Elsztain has been speaking to the media for the first time since losing IDB Development, once one of the glories of the Tel Aviv Stock Exchange (TASE), which he bought from Nochi Dankner in 2012. He lost IDB last month after refusing to pay the NIS 70 million that he owed bondholders.
You talk about how you always pay everything on time but in this instance you didn't pay and you also played into the hands of the bondholders.
Elsztain: "The NIS 70 million was just an excuse and a trap. When I heard the rumor that they want me to pay this amount so that they could demand more and squeeze me for more the next day, I understood who I was dealing with. I have invested in a lot of places in the world and I have never seen a group of bondholders led by people that want to buy your company. When I began to invest in Israel, I received a call from a senior Jewish banker who warned me not to invest here. From my point of view, Israel is the best place to invest, but I didn't think that they would rob me.
Perhaps they are just people that want their money back?
"I made them (the Series 9 bondholders, the only series that has no securities) three official offers through the Tel Aviv Stock Exchange's notifications system and they didn't even answer me on one of them."
Do you think they aimed this for a period when you were ill and weak?
"I think that if they really wanted to get their money back after I had paid for eight years and all that was left for me to pay over the next eight years is NIS 1.8 billion (nominal), they would have been happier to receive my settlement offer. But I got from them a message of extortion."
Extortion? They sent a message like that to you
"It's a market in which everybody knows everything."
Elsztain is referring to the claims that arose that even if he had paid the NIS 70 million, the bondholders would have continued in their attempts to get the company off him.
So what will be now?
"I believe in Israeli justice and the Israeli courts"
Which meanwhile has not accepted your claims
"There is justice and I will stay here until they say 'Eduardo we no longer want you.'"
"We have more resources than you can imagine"
When Elsztain says that he is not giving up, and his intention is to continue owning the company, he means that the struggle still remains over Discount Investment Corporation (TASE: DISI), the main asset of IDB Development, and which owns the main operations belonging to it such as Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Property and Building Ltd. (TASE: PTBL), and Israir Airlines and Tourism Ltd..
Discount Investment may now be up for sale through an auction in which Elsztain can take part. When we ask him if he plans bidding in the auction, he makes do with a vague answer. "I plan remaining the controlling shareholder of Discount Investment," and he refuses to expand on that.
It should be noted that at the end of last week an agreement was signed between Discount Investment's various receivers, which very much raises the chances that Mega Or (TASE: MGOR), controlled by Zahi Nahmias, a rising star in the Israeli economy, will win control of the company.
Nahmias has agreed to pay NIS 950 million for a 70% controlling stake in Discount Investment - much more than the minimum amount required - and he has been promised that no other offer will be accepted unless it is at least NIS 40 million higher and even then he will be awarded NIS 15 million compensation for not winning control of the company.
And here too Elsztain does not take things at face value but sees them as a conspiracy between some of the bondholders and Nahmias, with whom he has been at loggerheads for some time. In addition, on Tuesday Elsztain filed a court petition against the receivers agreement with Mega Or, claiming that the preconditions are "scandalous."
Nahmias has declined to comment on the claims in this interview.
When Elsztain is asked if he has the resources to buy Discount Investment, he gets angry. "After I paid NIS 25 billion over eight years (the debts paid by IDB as a company to creditors during the period that Elsztain owned it), this question is not relevant."
It is certainly relevant if you want to buy Discount Investment in the auction. When the court asks you about your resources, what will you say?
"I've already been doing it for more than 40 years, and if I have made a committment - I will fulfil it. I have genuine assets. I know that here in Israel they don't believe you. Here nobody believes anybody but I know that if I continue here, I will continue to invest resources."
The terms of the pricing are that you need to show these resources
"You have to understand. We have more resources than you can imagine. I don't have to discuss this with you. At IRSA (NYSE: IRS) (Argentine's largest real estate company of which he is chairman and the largest private shareholder) we are in a very strong position. We have a company with shopping centers, we have Cresud with farms in South America and nothing has liens on it. We have commercial centers in South America and properties in the US. We have invested in gold."
That is not reflected in IRSA valuation, which is low, with a market cap of $400 million
"Argentina was in lockdown and the country was preoccupied with recycling its national debt. It is reflected in the valuations of all the companies."
So will you be the owner of Discount Investment?
For me the fact is that Israel is the journey of my life and I don't think that it is over. I am about to fight with all my strength and my full commitment and all my economic resources. I always say that it is more important to me the way I behave, I want to do things that will make my children proud of me, not to make money. People aren't born with assets and are not buried with assets. What is important is what they do in between."
And you don't regret investing in Israel?
"I don't regret anything. The eight years with IDB have been the best years of my life. There were struggles and I was in court but if you ask me, never count the money that you invest."
And isn't there a point where you'll raise your hands and give up on investment here?
"I am going to fight with all my might. I'll never give up."
A spokesperson for the Series 9 bondholders said in response. "We are sorry that Mr. Elsztain chose to demonize and distort the facts. Elsztain violated explicit commitments to inject NIS 140 million into IDB. On the basis of this commitment, and when it was already clear that IDB is insolvent, Elsztain bought himself a lot of time to conduct negotiations with the bondholders, which he mainly used to send unilateral and not serious offers, which included huge write downs amounting to hundreds of millions of shekels."
The Brosh Fund said, "We are sorry about Elsztain's situation and the place to which he has brought IDB under his failed management. The Brosh Fund will continue to work professionally, fairly and transparently in order to create value for bondholders. We wish Mr. Elsztain success for the future in his businesses in Argentina but to the creditors and shareholders of the IDB group of companies - he won't be missed."
The Alpha Fund said, "The fund has led a rational and moderate approach throughout to solve the debt issue both with the owner and management of IDB and the rest of the debt holders, in order to bring about an agreed plan for everybody. The Alpha Fund weighs up all offers placed before it in a serious and measured way with the aim of receiving a reasonable solution for the payment of the debt of IDB, which had violated its commitments in a blatant way and Mr. Elsztain refused to transfer NIS 70 million in September to which he had committed."
Published by Globes, Israel business news - en.globes.co.il - on October 21, 2020
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