Even as IDB Development Corporation's bondholders representative claims that the value of the company's assets is negative and that it is insolvent, sources inform ''Globes'' that the company has an opinion by Fahn Kanne Consulting Ltd., which states that its net asset value (NAV) is $400-900 million. In other words, the current value of IDB Development's assets is NIS 1.45-3.3 billion more than its liabilities, and it should therefore not be removed from the control of taken from its parent company, IDB Holding Corp. Ltd. (TASE:IDBH) and Ganden Investments Ltd., through which Nochi Dankner controls IDB.
Fahn Kanne, which was hired by IDB, finds that the company is solvent and can meet its debts. The opinion counters the opinion by TASC Strategic Consulting, on which IDB Development's bondholders representative relies. On Sunday, the representative petitioned the court to impose a debt settlement on the company.
Fahn Kanne Consulting, a subsidiary of Fahn Kanne & Co. Grant Thornton Israel, provides financial consulting services. Both Fahn Kanne and IDB Development declined to comment on the report.
Sources close to IDB say that the differences arise from the fact that IDB Development has cash reserves for one year forward, which means that the betterment of its assets and their sale will not be done under pressure or distress. This also means that the valuation of its assets is higher than the assessment by TASC on which the bondholders representative relies. TASC believes that, under IDB Development's current ownership, the company will not have enough money to meet its NIS 6 billion in liabilities.
The sources added that Fahn Kanne's opinion has been sent to the Israel Securities Authority for review, following the bondholders representative's petition to the court. Tel Aviv District Court Judge Eitan Orenstin will hear the case on Sunday.
Fahn Kanne's findings completely contract the findings by TASC for the bondholders. TASC says that IDB Development's liabilities exceed the value of its assets (excluding secured debts) by NIS 1.55 billion. It says that the company's coverage ratio (the ratio between all its assets and all its unsecured liabilities, on the basis of current market values) is 73%. A company can repay its debts in full only if this ratio is 100%.
TASC says that, even under an optimistic assessment, which assumes a substantial increase in the value of IDB Development's main holdings, the company's coverage ratio does not exceed 81%, and that its NAV is negative and NIS 1.07 billion less than its liabilities.
Challenges on every front
TASC's opinion is the main basis for the aggressive stance taken by IDB Development's bondholders representative, which wants to take over the company's shares in full under an imposed debt settlement. The petition to the court by the bondholders representative - Psagot Investment House Ltd., The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), and York Capital Management states, "There is no reasonable scenario in which the company can service all its future debt payments on time," effectively meaning that it is insolvent.
The fight between continued business as usual at IDB Development and an imposed debt settlement on the company, under which its shares will be transferred to its creditors, is the main challenge facing Dankner's collapsing conglomerate. But this is not the only challenge.
In addition to the aggressive measures taken by IDB Development's bondholders representative, parent company IDB Holding, and the private companies through which Dankner controls it - Ganden and Tomahawk Investments Ltd. - are liable to become insolvent and unable to repay their creditor banks and bondholders, which lent them NIS 3 billion.
In the wake of unprecedented public criticism, last week, Bank Leumi (TASE: LUMI) withdrew from the debt settlement it had concluded with Ganden, cutting the ground (at least temporarily) from under the proposed debt settlement Dankner had reached with IDB Holding's bondholders.
Danker is currently in Argentina to quickly secure the follow-on investment in Ganden by Eduardo Elsztain. For now, it seems that the only way Dankner can keep control of IDB, and prevent its collapse under its crushing debt, is if Elsztain proceeds with a $75 million investment in Ganden.
Published by Globes [online], Israel business news - www.globes-online.com - on April 23, 2013
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