Two large provisions for the fall in Credit Suisse's share price and the fall in value of land in Las Vegas as well as the fall in the profits of the group's two cash cows, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Shufersal Ltd. (TASE:SAE), led to a huge, NIS 1.76 billion loss for IDB Holding Corp. Ltd. (TASE:IDBH) in the third quarter. The blows that the group sustained in the quarter pushed IDB Israel's leading conglomerate into a deficit on shareholders' equity of NIS 1.08 billion.
Apart from the heavy loss, IDB Holding, which is at the pinnacle of the group of companies controlled by Nochi Dankner, is liable to find it difficult to service its debts in the coming year. At the end of the third quarter, the holding company had just NIS 82 million cash, while over the next year it will have to repay bonds to the tune of NIS 400 million.
Against this background, the group announced today that it had obtained a $40 million credit line from an overseas bank. This loan, provided without collateral, is for four years, and carries a high interest rate of Libor plus 6.5%, payable quarterly.
This loan by itself is not enough to enable the company to meet the challenge of repaying its debts in 2012. A few weeks ago, IDB Development (a wholly owned subsidiary of IDB Holding) declared a NIS 64 million dividend. At the end of the third quarter, IDB Development had a negative balance of profits available for distribution of NIS 1.65 billion, so that it cannot distribute a dividend except by special permission of the court.
In its statement of cash flows, the group states that it will require "other sources" to the tune of NIS 250 million in order to be able to meet its commitments in the coming year. The company stresses that, until June 2012, it will not need additional sources of cash, and points out that it expects that it will have available several possibilities for raising money, whether through loans and issuing capital, of via capital reduction with court approval. Over the next two years, the group will have to raise some NIS 600 million to meet its commitments.
IDB stressed today that the main companies in the group had liquid balances of NIS 13 billion, of which NIS 8 billion was in the headquarter companies. In the fourth quarter, the group's companies are expected to post substantial capital gains, amounting to nearly NIS 1 billion, as a result of the sale of control in Makhteshim Agan, and the sale of Fundtech to GTCR.
Dankner, who is chairman of the group, said today, "We are reporting on a tough quarter with poor performance by most of the group's companies, the cause of which is the deep economic crisis, chiefly in Europe, which also affects the Israeli economy. The economic slowdown has affected the group's results, and today it is clear to everyone that the global economic reality has changed dramatically, and the world is again coping with a deep economic recession."
Published by Globes [online], Israel business news - www.globes-online.com - on November 30, 2011
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