Israeli business tycoon Nochi Dankner has sidestepped default, but his IDB Holding Corp isn’t out of danger yet, according to media reports.
Dankner reached a debt agreement on Tuesday with bondholders to avert default on about 2.06 billion shekels ($560 million) by offering to transfer 15 percent of the company’s shares to bondholders as well as infuse some 500 million shekels in cash. The agreement, which allows Dankner to maintain control of the company, also calls for three new bond series to be issued at a value of about 1.56 billion shekels, according to a company filing to the Tel-Aviv Stock Exchange today.
“This is not a day of celebration for bondholders, as the company still has to show how it is going to make future payments from sources it doesn’t have,” said Yaniv Pagot, chief strategist at Ramat Gan, Israel-based Ayalon Group Ltd. “IDB is winning time and the controlling shareholder gets the chance to stay in place.”
Standard & Poor’s Maalot in December cut IDB’s debt rating to default citing a “large gap” between the company’s available funds and its obligations.
The success of Dankner’s maneuvering depends largely on a deal with Eduardo Elsztain, an Argentinian businessman who agreed in September to pay $25 million for 10 percent of IDB’s parent company Ganden Holdings with the option of investing another $75 million, Globes reported. Much now depends on that $75 million.
IDB’s bondholders will now have to vote on the settlement at a general meeting.
A source close to the deal termed the settlement fair “Nochi made the effort, and we see it,” he said.