Sources inform ''Globes'' that IDB Holding Corp. Ltd.'s (TASE:IDBH) new controlling shareholders, Eduardo Elsztain and Moti Ben-Moshe are scheduling meetings with the banking syndicate to revise the financial covenants for the NIS 1.4 billion bank debt of IDB Development Corporation. Half of the debt is owed to Bank Hapoalim (TASE: POLI), and the rest is owed to Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), Mizrahi Tefahot Bank (TASE:MZTF), BNP Paribas SA (Euronext: BNP), and HSBC Holding plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC), which are owed NIS 100-160 million each.
IDB Development's financial condition is shaky. 18 months ago, when it was still controlled by Nochi Dankner, it reached a deal with the banks to deviate from the covenants in the original loan agreement. The agreement was extended in March 2013 until April 2014, which gives IDB's new owners two months to reach a new deal. If no agreement is reached, the banks will have cause to immediately call in the debt, which would cost Elsztain and Ben-Moshe the company.
Elsztain and Ben-Moshe's consortium said in response, "No meetings with the banks have yet been scheduled."
"We will not agree to a postponement of the debt's principal, but we won't lower the axe because of a deviation from the covenants," said a source at one of the banks. A source at another bank said, "We should first meet the new owners, hear their plans, and see how they plan to repay the debt. Then, if the plan appears reasonable, it will be possible to be flexible on the covenants."
Dependent on Clal Insurance sale
The main covenant that will be under discussion will be IDB Development's requirement to keep enough cash on hand to meet six months of bond payments. This is not the case at the moment: although it has enough cash to meet the NIS 300 million in bond payments at the end of April, if the payment is made in full, it will have no cash reserves without a large capital injection.
IDB Development debt totals NIS 5.4 billion, of which NIS 4 billion is owed to bondholders, and the rest to the banks. A critical source of liquidity would come from the sale of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), which, if closed, should generate NIS 1.3 billion in cash, giving IDB up to 12 months breathing space. However, there is still a large question mark over the sale of the controlling interest in Clal Insurance to the group of Chinese investors.
Elsztain and Ben-Moshe have promised to provide a NIS 100 bridge loan before the closing of IDB's debt settlement, and irrespective of the sale of Clal Insurance, they have promised a subsequent capital injection of NIS 550 million. Due to the delay in the sale of the company, they may have to increase the bridge loan at the expense of the future capital injection, and it is unclear whether they have the wherewithal to do so.
It is therefore possible that Elsztain and Ben-Moshe, together with the trustees of the IDB debt settlement, Eyal Gabay and Adv. Hagai Ullman, to sell other assets, such as shares of Discount Investment Corporation (TASE: DISI) and Clal Insurance.
Published by Globes [online], Israel business news - www.globes-online.com - on January 15, 2014
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