The public pressure on Bank Leumi (TASE: LUMI) has had its effect: the bank announced on Friday that it was cancelling the debt settlement that it had formulated with Ganden Investments Ltd., the company through which Nochi Dankner controls IDB Holding Corp. Ltd. (TASE:IDBH).
"The outline arrangement, which in any case had not become a signed agreement, has become redundant and is no longer on the agenda," the bank stated. This decision is a blow to Dankner, since, without an arrangement with Bank Leumi, he will find it very hard to emerge from the IDB group's financial difficulties, and those of the private companies he controls, Tomahawk Investments Ltd. and Ganden.
The consequence is that Leumi is likely to realize its collateral for Ganden's debt. This is in the form of a lien on 30.7% of the shares of IDB Holding. In other words, if Bank Leumi forecloses, Dankner will lose control of the group, which will pass to the bank. Dankner himself wrote in a letter to IDB employees that he was confident that he would reach a settlement with his creditors.
The Bank Leumi board met on Friday to discuss the debt settlement with Ganden and the public outcry against it. The settlement meant a write-down of NIS 150 million, a third of Ganden's debt. The bank explained that the decision to withdraw from the settlement stemmed from an assessment that Eduardo Elsztain would not proceed with a further investment in Ganden, because this was conditional upon a cluster of arrangements with banks and other creditors that the bank believed could not be achieved.
The bank also stated that its CEO, Rakefet Russak-Aminoach, had given directions that all the available ways of collecting Ganden's debt to the bank should be tried. Ganden owes Bank Leumi NIS 450 million. Against this, Bank Leumi has collateral in the form of Ganden's shares in IDB, currently worth about NIS 200 million. Even if Bank Leumi forecloses on the shares, its problems will not end there, since IDB Holding itself is in financial difficulties and in the process of negotiating a debt settlement.
Published by Globes [online], Israel business news - www.globes-online.com - on April 21, 2013
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