Yitzhak Tshuva and Nochi Dankner have again rescheduled their $520 million, taken in the summer of 2007 to buy the land for their planned $7.5 billion Plaza casino and hotel in Las Vegas by two months from August 9 to October 9. Tshuva's private company Elad Properties and Dankner's IDB Holding Corp. Ltd. (TASE:IDBH) unit IDB Development and its subsidiary Property and Building Ltd. (TASE: PTBL) are also continuing negotiations with the lenders on a general debt settlement, which will involve a capital injection and 50-90% reduction in the debt.
Dankner and Tshuva bought the site of the old Frontier casino on the Las Vegas Strip for $1.24 billion. They own the project in equal shares. The companies financed half the purchase from equity, most of which has apparently been written off, and financed the rest with a loan from a syndicate of Israeli and foreign banks and financial institutions. The Israeli lenders included Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), which provided $100 million, and Bank Hapoalim (TASE: POLI) and Mizrahi Tefahot Bank (TASE:MZTF), which each provided $25 million.
The loan was in two parts: $445 million at LIBOR plus 2.75%, and $175 million at LIBOR plus 4%. The loan was originally due to be repaid in August 2009, but in March, the companies obtained a 42-month extension until August 2012.
Although Tshuva and Dankner presented the loan extension as a vote of confidence by the lenders, "Globes" revealed that it cost them an additional $100 million to secure the extra interest payments. The loan is secured by a lien on the land (a non-recourse loan) and by guarantees by Tshuva and Dankner against certain violations of the loan agreement related to repayment of the balance of the loan. Although IDB and Property and Building are public companies, they have never disclosed these guarantees.
Tshuva and Dankner are now due to repay the $620 million loan principle in October, while the lenders will refrain from taking any remedies for non-repayment. Elad and IDB will deposit $2.1 million in the project company's account and $2.5 million in favor of the lenders.
Despite the current dismal shape of the Plaza Casino project, Tshuva and Dankner are in no hurry to give it up, and not just out of ego. Las Vegas is beginning to recover, with 39 million visitors spending $9.2 billion in 2011. Until they can resume the project, they are bleeding money. Their write-downs on the land are not enough: although IDB Development and Property and Building book it at $700 million, but its fair value is less. The two companies, which each own 25% of the project, book the value of the project company at $26 million, after writing off $230 million for it altogether.
Published by Globes [online], Israel business news - www.globes-online.com - on August 12, 2012
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