Barring last-minute surprises, it appears that Naty Saidoff will acquire control of Eurocom Group. Late last week, the Discount Investment group, controlled by Eduardo Elsztain, decided to abandon its effort to obtain control of Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) through acquisition of Eurocom, Bezeq's ultimate holding company. and it is believed that the Neuman brothers, who are bidding with billionaire Elie Horn, will be unable to file an improved bid by today's meeting of Eurocom's creditors. Saidoff's bid is therefore the sole valid bid right now, and he also made several improvements in it late last week.
After Judge Iris Lushi-Abudi yesterday ordered the cancelation of the Eurocom creditors meeting, she agreed today to reverse her ruling and allow the meeting to take place. The reversal came after Eurocom, the creditor banks, and Naty Saidoff yesterday urgently petitioned the court to allow the creditors' meeting to take place as soon as possible.
Bank Hapoalim (TASE: POLI) and First International Bank of Israel (TASE: FTIN) have already voted in favor of Saidoff's bid. Israel Discount Bank (TASE: DSCT), the largest creditor, will hold a board of directors meeting on the subject only today, shortly before the creditors' meeting. It appears that Discount Bank prefers to wait until the last minute in order to see whether there are any new developments or additional bids.
Sources close to the creditors' arrangement say that even if Saidoff's bid is selected, it will still not settle the matter irrevocably. "Even the banks whose boards of directors approved Saidoff's bid say they will reconsider their decision if a better bid is submitted," says a source close to the negotiations.
Several other parties are interested in acquiring Eurocom, but time is not on their side. For example, "Globes" reported late last week that Albert Nasser was trying to form a group of investors to acquire control of Eurocom, and that his representatives had asked Eurocom to postpone the creditors' meeting in order to enable a bid to be made.
It is believed that the real deadline is the end of April, when a discussion about the Eurocom creditors' collateral has been scheduled.
Saidoff's bid is valid until today's creditors' meeting, which means that the creditors are running the risk that Saidoff will not renew his bid if it is not approved.
Discount Investment gave up the idea of acquiring Eurocom after the banks demanded a commitment pay a NIS 200 million fine if Discount Investment does not manage to sell Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) in order to complete the Bezeq deal. This demand was more than Discount Investment was willing to undertake. At the same time, Discount Investment's announcement indicates that it is leaving itself an opening to bid again if the terms for the auction are changed.
The recent developments in Bezeq are certainly not soothing for the creditors. Following the travails of Bezeq executives and the Elovitch family, some of the creditors prefer to conclude the debt arrangement as soon as possible, without risking the consequences of the continued upheaval in the Bezeq group.
A write-off of up to NIS 500 million
The value of the improvements in Saidoff's bid for Eurocom amount to tens of millions of shekels. Saidoff agreed to assume the burden of any tax consequences of the debt arrangement, and is also acceding to the demand by some of the banks not to leave Elovitch with any Eurocom shares. Under the settlement, Elovitch was to have retained a 10% stake. Some of the banks are angry at Elovitch because of his handling of Eurocom's debt and his refusal to inject money into the company under the current arrangement, and have therefore insisted on leaving him with no holdings in the group.
Saidoff's debt arrangement includes a NIS 400 million injection and rescheduling a NIS 370 million debt over seven years.
In the bottom line the debt arrangement writes off NIS 400-500 million in debt. In addition to the write-off, Saidoff is offering the banks an upside mechanism based on a future increase in the value of Eurocom's assets. At the same time, there is uncertainty about this mechanism and the amount that the banks will receive under it.
Saidoff's bid does not relate to the Eurocom group's operating companies, which are currently under a court-ordered stay of proceedings. The stay of proceedings is for up to five weeks, while at the same time, the trustees (representing the banks) are conducting an expedited auction proceeding to sell the companies by February 25. The aim is to sell control of the companies for tens of millions of shekels, while writing off a NIS 600 million debt (half of this has been transferred to the debt arrangement for the Eurocom group itself, which has guaranteed the debt).
Published by Globes [online], Israel Business News - www.globes-online.com - on February 19, 2018
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