Income-producing real estate company Gazit-Globe Ltd. (NYSE: GZT; TASE: GZT; TSX: GZT) is still feeling the effect of the business catastrophe in U. Dori Construction Ltd. (TASE: DRCN). Gazit-Globe, controlled by Chaim Katzman and Dori Segal, today published a revised format for investment in subsidiary Dori Group Ltd. (TASE: DORI), parent company of U. Dori after recently announcing its intention of granting the group a NIS 200 million loan in order to reinforce its capital structure.
Under the new blueprint, Gazit-Globe will inject NIS 130 million into Dori Group in exchange for a private share placement at NIS 1.30 per Dori Group share, 50% higher than this morning's market price, and grant it a NIS 70 million credit line.
In addition, Gazit-Globe said it would transfer to Dori Group its rights and obligations in respect of a NIS 250 million credit line provided to U. Dori Construction in recent months, against the issuing of a capital note of the same par value.
Gazit-Globe took these measures after U. Dori Construction announced at the end of July that it expected a NIS 250-350 million loss in the second quarter, "due to a significant deviation in the cost estimates and expected revenue in projects the company is involved in."
The U. Dori Construction share has plummeted 55% since the announcement, and the Dori Group share has sunk 37%. In recent days, a petition was filed for authorization of a derivative lawsuit against U. Dori Construction, following a number of petitions for class lawsuits filed against it subsequent to its dramatic report.
Published by Globes [online], Israel business news - www.globes-online.com - on August 21, 2014
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