IDB Holding Corp. Ltd. (TASE:IDBH), controlled by chairman Nochi Dankner, has confirmed a "Globes" report that Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) has the right to immediately recall a loan provided to IDB Holding subsidiary IDB Development Corporation, after Standard & Poor's Maalot Ltd. downgraded the company's bonds to BBB. As "Globes" reported, Migdal is unlikely to recall the loan, and that the companies are renegotiating its terms. The balance on the loan is NIS 220 million.
In a notice to the TASE today, IDB Development said, "The company has been in talks with a financial institution about the terms of this loan, including possible agreements on its repayment and guarantees. Following a consensual temporary suspension on the validity of the provision giving the financial institution the right to recall the loan in the event of a rating downgrade of the company to BBB, the parties are reaching understandings. The understandings are subject to approval by their authorized parties, the main point of which is that this provision will be suspended for a period of three months, during which the parties intend to complete their discussions in order to reach final understandings with regard to the loan, and strengthening the loan guarantees ratio and reducing the debt."
IDB Development took the loan from Migdal in 2004 to buy Bank Leumi (TASE: LUMI) shares from Migdal. The purchase was partly financed by a $40 million loan, amounting to NIS 177 million at the time. IDB Development sold the Bank Leumi shares six weeks later, making a NIS 40 million capital gain. IDB provided Migdal with a lien on shares in subsidiary Koor Industries Ltd. (TASE:KOR) as collateral for the loan. The loan's principle is due to be repaid in three installments in 2015-17.
In its financial report for 2011, IDB Development said that the loan was secured by liens on subsidiaries Koor and Clal Industries and Investments Ltd. (TASE: CII). Pursuant to understandings between IDB Development and Migdal, IDB must provide guarantees worth 150% of the balance of the loan, i.e. NIS 321 million. The current value of the attached Koor shares is NIS 146 million, and the current value of the attached Clal Industries shares is NIS 200 million, for a total of NIS 346 million.
The slide in share and bond prices of IDB and its subsidiaries is continuing today. By mid-afternoon, IDB's share price was down 4.9% to NIS 22.17, Koor's share price was down 2.3% to NIS 48,20, the share price of its direct parent company Discount Investment Corporation (TASE: DISI) was down 5.4% to NSI 14.86, and Clal Industries' share price was down 1.2% to NIS 12.51.
Published by Globes [online], Israel business news - www.globes-online.com - on May 15, 2012
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