A month after Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH) reported a NIS 150 million write-off on the Plaza Casino and Hotel project in Las Vegas, due to the drop in value of the land, Dankner's partner in the project, Yitzhak Tshuva's Elad Properties, has made a write off in the same amount. As a result, the company reported a loss of $91 million for the third quarter, triple its $30 million loss for the corresponding quarter of 2010.
Elad Group's shareholders' equity was $390 million at the end of September.
Elad bought the 35-acre lot, occupied by the historic New Frontier Casino, for $1.24 billion in early 2007, paying for it from equity and a loan, in equal shares. Dankner later acquired half of the project, and they planned to build a $7 billion hotel and casino on the site. The plan evaporated with the onset of the global economic crisis, and they subsequently wrote $500 million off the project's value, and it could end up in the hands of its creditors.
Elad Group raised $650 million in a private placement of bonds in Tel Aviv. The company is not required to publish its financial results on the TASE, but in a press release yesterday, the company said that its assets totaled $4.1 billion at the end of September and it had a $252 million liquid balance. It has reduced its liability by $300 million since January.
Elad operates in North America through several subsidiaries, which own properties in New York, Florida, Las Vegas, and in Canada. The company lost a cumulative $500 million in 2008-10.
Evidence of Elad's financial condition emerged in late 2010, when the annual interest rate on its bonds was raised by 0.25 basis points to 6.9%, after Standard & Poor's Maalot Ltd. downgraded the bond to A-.
"Globes" recently reported that Elad Group representatives have been discussing with its bondholders - Israeli financial institutions - a possible conversion of the debt into equity in some of the companies' properties.
Yesterday, Elad Group CEO Udi Erez said, "In recent months, we've taken a number of measures to strengthen the company's capital and to reduce its financial liabilities by more than NIS 1 billion. Recognition of the successful sales of projects should come with the delivery of apartments, but the securing of financing, the pace of sales, and progress in work in line with the timetables are an important indication of the cash flow and resources expected in the coming years."
Elad Group posted $350 million revenue in January-September. It also announced that a banking syndicate led by HSBC Holding plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC) approved $184 million in financing to recycle the debt on the Plaza Hotel in New York at better prices and terms than the original loan.
Published by Globes [online], Israel business news - www.globes-online.com - on December 27, 2011
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