June 5 (Bloomberg) -- IDB Holding Corp.’s bonds soared to the highest in almost three months as Argentine businessman Eduardo Elsztain said he is ready to invest to save the Israeli company controlled by Chairman Nochi Dankner from creditors.
The yield on IDB’s 1.07 billion shekels ($292 million) of 5.1 percent bonds due in December 2020 plunged 273 basis points, or 2.73 percentage points, the first drop since June 2, to 56.88 percent, at the close in Tel Aviv. The shares jumped as much as 3 percent before trading 2.5 percent lower at 7.895 shekels.
Elsztain said yesterday in Israel he has “tremendous” will to make a $75 million investment and share ownership with Dankner of the holding company that’s struggling to meet payments on about 2.06 billion shekels in debt. The investment is part of a debt proposal by the Tel Aviv-based company countering bondholder efforts to wrest control from Dankner. The Tel Aviv District Court will tomorrow hold a hearing on the debt talks.
“Investors have more confidence now that new money will flow into the company,” Raz Mor, a corporate debt analyst at Tel Aviv-based DS Securities & Investments Ltd., said by phone. “Still much depends on the position of the court and the recommendations it will make.”
IDB Holding is offering to inject 540 million shekels in cash, according to an e-mailed company statement on June 1. The company will also issue 700 million shekels in bonds and debtholders will get a 10 percent stake in the company and another 10 percent in its IDB Development Corp. unit. Last month, IDB Development bondholders, including York Capital Management LP, joined forces to press a debt-to-equity swap to take over the company Dankner spent 15 years building.
IDB Development has positive net asset value of between 700 million shekels and 944 million shekels, according to a report by a court-appointed official submitted today ahead of tomorrow’s hearing. The company has enough funds to repay debt until the end of this year and will need to sell half of its stake in Clal Insurance Enterprise Holdings Ltd. to meet obligations of about 1 billion shekels by March 2015, according to the report. IDB Development said May 24 it received an offer from a foreign fund for half of its 55 percent stake in Clal Insurance.
Standard & Poor’s Maalot yesterday lowered IDB Development’s rating by five levels to ilCC citing the possibility of default as a result of continued erosion of liquidity and a “going concern” warning.
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