Suny Electronics Ltd. (TASE: SUNY), controlled by Ilan Ben-Dov, has withdrawn its offer for a debt settlement because of the deterioration in the work relationship of subsidiary Scailex Corporation (TASE: SCIX; Pink Sheets:SCIXF) with Samsung Electronics Co. Ltd. (KSX: 5930; LSE: SMSN). The dispute between the companies is jeopardizing Scailex's distribution agreement with Samsung, affecting Scailex's financial results.
In a notice to the Tel Aviv Stock Exchange (TASE) today, Suny said that it would not ask the court to approve the debt settlement, because the company may lose its Samsung distribution franchise, rendering the settlement irrelevant.
Suny owes its bondholders NIS 270 million. Scailex's debt totals NIS 950 million, including NIS 550 million owed to bondholders, which is not backed by any collateral. Most of the debt is held by Lapidoth Israel Oil Prospectors Corporation Ltd. (TASE: LAPD), controlled by Yaakov Luxembourg, and by nostro parties in the capital market.
The deteriorating relations with Samsung resulted in a going concern warning attached to Scailex's financial report for the first quarter of 2014, published in late May. Two weeks ago, Samsung notified Scailex demanding to change the terms of its license to sell Samsung handsets, and to shorten the franchise from the end of 2020 to the end of 2015. Samsung said that if Scailex did not agree to the new terms, Samsung would freeze its supplier's credit to the company.
In the financial report, Scailex said that if could not change Samsung's position, this was liable to have a material deleterious effect on its ability to meet its targets under the distribution agreement for Samsung telephones and peripherals, on the company's projected cash flow, on the fair value of the company's business, on its Nat Asset Value, and on its repayment ability. These circumstances could be cause for the immediate calling in of Scailex's indenture's and credit documents with the banks and investment institutions that provided credit to the company.
Published by Globes [online], Israel business news - www.globes-online.com - on June 10, 2014
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