Even if, over the past year, Nochi Dankner has lost the capital market's confidence and the public's esteem, it's hard not to admire the mighty efforts he has invested in the attempt to reach a debt arrangement in IDB Holding Corp. Ltd. (TASE:IDBH) that will preserve, at least partially, his control of the company.
Dankner, who in the not so distant past was considered a successful and admirable businessman, has been conducting a battle for survival after a series of business failures that brought IDB to the brink of collapse and turned him from a symbol of success into someone who for many symbolizes what is wrong with the financial system.
Despite all that, at the end of last week Dankner returned from Argentina with an agreement in his pocket for an investment of $75 million by Eduardo Elsztain in shares of IDB Holding and the private company through which he controls IBI, Ganden. Together with Elsztain's earlier investment in the group, amounting to $25 million, this external contribution comes to $100 million.
This is not a negligible sum, especially considering that there is no-one else in the vicinity who would be prepared to invest a similar amount in Dankner's businesses. Some doubt surrounds the completion of the deal however, since Elsztain's investment is conditional upon the achievement of an overall debt arrangement for IDB and Ganden, which together owe their lender banks and bondholders the much larger sum of NIS 2.5 billion.
A further condition is "the absence of any change for the worse in the position of IDB Holding". Such a change is liable to come about through the current attempt by the bondholders of subsidiary IDB Development to take over that company through a petition to the court to order an imposed debt settlement. If the court grants the petition, that will empty IDB Holding of its assets, leading to cancellation of the planned investment by Elsztain.
As things look now, Dankner will continue to fight to retain control of IDB, and will probably survive the current round, giving him a certain amount of breathing room. The reason for that is that the parties that could topple him today the lender banks and the bondholders of the insolvent IDB Holding don't want to do so, while those who do want to topple him the IDB Development bondholders are unable to.
But even if he succeeds in completing the deal with Elsztain, Dankner's standing at the concern will be much weaker than he has been used to. He will no longer be the sole boss whose word is final; there will be no more inflated and expensive management structure; there will be no further deals with people close to him. With huge private debts to the banks, another strong shareholder alongside him (Elsztain), and growing involvement by IDB's creditors in overseeing the conduct of the group, Dankner will not go back to being the dominant businessman he was.
Published by Globes [online], Israel business news - www.globes-online.com - on April 30, 2013
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