Credit Suisse almost at threshold for Koor

Morgan Stanley and City, which financed Koor's acquisition of Credit Suisse shares, agree to lower threshold price, below which they might demand immediate repayment of loan. Credit Suisse continues nosedive to 8% above floor price; Dankner bidding for further drop of floor price

Golan Hazani, Calcalist |Published: 08.08.11 , 15:49

Credit Suisse share spiraled on the New York and Swiss stock exchanges, taking with it the shares of Koor Industries, under the control of Nochi Dankner. The company took a 17.6% nosedived on the Tel Aviv Stock Exchange, cutting the company's market cap to less than NIS 2.5 million (about $705,000).

On Sunday, IDB Group reported that its subsidiary Discount Investments would grant Koor a NIS 500 million ($141 million) loan scheduled for repayment by the end of March 2012.

The loan was intended to beef up collateral for the two banks which are financing the Credit Suisse deal – Morgan Stanley and City. The loan from both banks for Koor's Credit Suisse deal totaled NIS 3.8 billion ($1.07 billion).

Two years ago, Koor acquired 3.21% Credit Suisse's shares for approximately NIS 7 billion ($1.97 billion). Over the weekend the share tumbled on SIX and NYSE to a NIS 4.3 billion ($1.2 billion) market cap. In fact, the share dropped below its "first round" price.

Koor deposited NIS 1.6 billion ($450 million) and pledged all if its Credit Suisse shares as security for the loan. Koor committed itself to a benchmark in the form of a set debt-to-guarantee ratio meaning that if the share drops below a specified threshold, the banks can exercise their rights to the deposit and to the shares.

Until Sunday afternoon, the threshold was not disclosed; however, at the behest of ISA it was recently published revealing that the threshold was 22 Swiss franc per share. The share was traded Sunday on SIX at 32.81 Swiss francs per share – a level that comes close to the set threshold (at approximately 8%) and Koor is attempting to swiftly beef up the guarantee deposit and push the threshold down by a further 10%.

The publication of the Credit Suisse floor price was possible due to the requirement set forth by the Israel Securities Authority which has been closely following events of the past weeks while holding intensive talks with company; however, as long as the share was nowhere near the floor price, ISA allowed Koor to refrain from disclosing the floor price which, two weeks ago, was 24 franc per share.

Upon an arrangement with the loaning banks, Koor dropped the price and on Sunday ISA – headed by Professor Shmuel Hauserwho follows an hands-on policy – insisted that the floor price be publicized.

Koor had NIS 416 million ($117 million) in its cash box at the end of the first quarter and it might use this cash balance to further drop the threshold to below 20 Swiss francs per share. Calcalist learned that Koor's talks with the banks over lowering the threshold are at their final stages and a new threshold may be publicized as early as this Monday.

Koor plans to repay the loan from Discount Investments once it receives the proceeds form the sale of its controlling interest in the subsidiary Makhteshim Agan Industries to Chinese national chemical company ChemChina which is expected to be finalized on October, pouring $1.1 billion into Koor's till for its share in Makhteshim – higher than the banks' loan for the financing the Credit Suisse deal.

On Sunday, another development occurred when the Makhteshim Agan shareholders unanimously voted in favor of the deal at the shareholders' meeting. The last approval needed to conclude the deal is from the European antitrust authority.