Israeli businessman Nochi Dankner fended off bondholder attempts to wrest control of his IDB Holding Corp. as a Tel Aviv court today gave him more than two months to sell a stake in a unit.
The company has until Aug. 22 to arrange for a sale of a stake in Clal Insurance Enterprises Holdings Ltd., the court ruled. Dankner, chairman of the Tel Aviv-based holding company, said he will work to meet the “short and challenging” deadline. IDB Development Corp., a unit of IDB Holding and controlling shareholder in Clal, said May 24 it received an offer from a foreign fund for half of its 55 percent stake which valued the insurer at 4.5 billion shekels ($1.25 billion).
Dankner, whose company is struggling to meet payments on about 2.06 billion shekels, got agreement on June 4 from Eduardo Elsztain for the Argentine businessman to invest $75 million. The terms of the investment and fundraising commitment by Elsztain are part of a proposal to counter bondholder efforts to take over the debt-strapped company Dankner spent 15 years building.
“The court decision means IDB is winning time, but there is no advancement on the debt restructuring and survival of the group,” said Oren Ossad, a trader at Excellence Nessuah Investment House Ltd., in Ramat Gan, Israel. “It is hard to see how Dankner will be able to sell Clal in such a short period of time.”
IDB Holding shares in Tel Aviv surged 7.8 percent to 8.604 shekels, for the highest close since May 22 in almost eight times the three-month average daily volume. Clal shares rose for a fourth day, increasing 0.3 percent to 65.10 shekels. The yield on IDB Holding’s 1.07 billion shekels of 5.1 percent bonds due in December 2020 rose for the first time in three days, adding 52 basis points, or 0.52 percentage points, to 57.33 percent. It fell 314 basis points in May, the biggest decline since the month ending Jan. 31.
IDB Development will need to repay creditors 800 million shekels by Aug. 31, the court also ruled today. The company, which owes 6 billion shekels to bondholders and banks, has assets valued between 700 million shekels and 944 million shekels, according to a report by a court-appointed official on June 5.
At today’s Tel Aviv District Court hearing, which was also attended by Dankner and Elsztain, Judge Eitan Orenstein said IDB Development will need to sell part of its Clal stake in the near future, otherwise “the company won’t be able to meet its payments” until the end of 2014.
Elsztain will deposit his invest in an escrow account to paid gradually to the company upon court approval, according to a filing to the Tel Aviv bourse yesterday.
IDB Holding offered to inject 540 million shekels in cash, according to a statement on June 1. The company would also issue 700 million shekels in bonds and debtholders would get a 10 percent stake in the company and another 10 percent in IDB Development as part of Dankner’s proposal. The offer came after bondholders of both IDB Development, including York Capital Management LP, and IDB Holding joined hands last month to force a debt-to-equity swap increasing the possibility that Dankner may lose control of the companies.
Dankner built IDB Holding from a family business that made its fortune in table salt and real estate into a company which includes Israel’s biggest supermarket chain, Shufersal Ltd., and largest mobile operator, Cellcom Israel Ltd.
A combination of unprofitable investments and regulations to boost competition prompted IDB Holding to include a going-concern warning in its first-quarter earnings report on June 1. It also said that Bank Leumi Le-Israel Ltd. is calling for immediate repayment of a loan to parent company Ganden Holdings Ltd.