By this Sunday, IDB Holding Corp. Ltd. (TASE:IDBH) and its creditors are due to submit to the court their plans for a debt arrangement in the group, a proceeding that could pave the way to a change in control. The legal proceedings began with the claim of the IDB Development bondholders that the company is insolvent, which the company firmly denies.
"Globes" has learned that the legal proceedings might have been shorter, or even avoided, if IDB's management had accepted a proposal recently received from US private equity firms KKR and Prudence Holdings. Two months ago, these two firms offered to extend a loan of $400 million (NIS 1.45 billion) to IDB Development, in equal shares, for six years, at an annual interest rate of Libor plus 9.5%. Negotiations between the parties did not mature into an agreement, as far as is known because objections by IDB's management, headed by Nochi Dankner, to the loan terms. These included liens on the shares of the main companies in the group, Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) (currently up for sale, and, according the court decision, to be sold by August 22), Shufersal Ltd. (TASE:SAE), and Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL).
The two private equity firms also demanded an option on 15% of IDB Development, restructuring of the group's management, and involvement in running it.
A year ago, KKR was in talks with IDB Holding on a $200 million loan against a lien on Koor's option on 40% of Makhteshim Agan Industries Ltd., a proposal that Dankner turned down.
Meanwhile, IDB Development subsidiary Discount Investment Corporation (TASE: DISI) reported to the Tel Aviv Stock Exchange today that, for the first time in four years, it was raising public debt, by expanding its F series bond. The bonds will have a duration of 6.6 years, and will be index-linked, bearing annual interest of 4.95%, with repayment in 2017-2025.
The company said the object of the offering was to boost liquidity, and that the immediate aim was to raise NIS 200 million. If the warrants in the offering are exercised, the company will receive a further NIS 305 million at the beginning of September, and a further NIS 106 million towards the end of the year, giving a total of NIS 660 million.
Discount Investment is a solvent company with a positive net asset value, but there is the possibility of a cash flow problem at the company, since it is estimated to be short of NIS 300 million to meet debt repayments in the coming year.
Separately, this morning Tel Aviv District Court judge Eitan Orenstin approved the appointement of Eduardo Elsztain as deputy chairman of IDB Development.
Published by Globes [online], Israel business news - www.globes-online.com - on July 4, 2013
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