The yield on IDB Holding Corp.’s 2020 bonds soared the most in more than two months as holders of the debt-strapped Israeli company vote on a payment proposal amid so-far failed talks with controlling shareholder Nochi Dankner.
The yield on IDB Holding’s 1.07 billion shekels ($294 million) of 5.1 percent notes due December 2020 jumped 247 basis points, or 2.47 percentage points, the most since May 27, to 65.60 percent at the close in Tel Aviv. The shares gained 1.9 percent, the most since June 9, to 6.774 shekels.
Debtholders at the company struggling to make payments on about 2 billion shekels today met to discuss a settlement plan, which includes full or partial conversion of debt into unit IDB Development Corp. shares. They have until tomorrow to vote on a framework to meet a July 7 court deadline. The meeting follows efforts by Chairman Dankner to find investors and sell assets to avoid bondholders’ wresting control.
“We held talks with IDB last night but no concrete conclusions on a debt accord have been reached,” Yoav Armoni, chief executive officer of Gilad Pension Fund, which holds 58 million shekels of the debt, said at today’s meeting in Tel Aviv. “We will continue talks with IDB, while also preparing our own debt proposal and file it to the court.”
Members of IDB’s management and Argentinian investor Eduardo Elsztain attended yesterday’s meeting, according to Armoni. Elsztain, who this week was appointed deputy chairman of IDB Development, last month committed to investing $75 million and sharing ownership with Dankner. A spokeswoman for IDB, who asked not be be identified citing company policy, declined to comment on the talks.
“The market doesn’t expect much to come out of the talks with Dankner,” Avihay Hermon, a bond trader at Israel Discount Bank Ltd., said by phone from Tel Aviv. “We are still far away from a solution which is pushing yields up.”
The Israeli Supreme Court today rejected IDB’s request to extend an Aug. 22 deadline set by a Tel Aviv court for Dankner to arrange the sale of a stake in Clal Insurance Enterprises Holdings Ltd. The lower court said June 9 that the sale was necessary otherwise “the company won’t be able to meet its payments” through 2014.
Bondholders of IDB Holding and IDB Development, which owns a 55 percent stake in Clal Insurance, joined hands in May to force a debt-to-equity swap, increasing the possibility that Dankner may lose control of the companies.
“In addition to this proposal we can expect the joint debt proposal as well as proposals by IDB and the banks to be submitted to the court next week,” said Armoni, who is also a member of the bondholder committee.