Dankner pledges cash for bondholders
Chairman of debt-laden Israeli conglomerate IDB Holding makes new debt restructuring offer, in bid to appease bondholders seeking to oust him
The IDB group, which has assets of $30 billion, controls Cellcom, Israel's leading mobile phone operator, supermarket chain Shufersal and Clal Insurance and its subsidiary Koor Industries owns a 2.4% stake in Credit Suisse.
Many of the companies IDB owns have been hard hit by a combination of slowing economic growth and increased competition.
IDB said under the latest debt restructuring proposal Dankner and Argentinean businessman Eduardo Elsztain and other controlling shareholders will inject NIS 375 million (about $102 million) into the company immediately, which will go towards paying bondholders, and the company will pay bondholders another NIS 165 million ($45 million) from cash on hand plus another NIS 100 million ($27 million) in the next four years.
In addition IDB said if a deal is reached with bondholders Elsztain will invest another $75 million, or NIS 280 million, in IDB Holding.
Under the plan, bondholders would still take a reduction in debt but receive 10% stakes in IDB Holding and its IDB Development unit and they would be issued a new bond series of NIS 700 million ($190 million).
"This is the best arrangement for all sides and it should be responsible," IDB said on Sunday.
"This is an important subject that has no room for speculation, manipulation, arm-twisting and ultimatums."
Representatives for bondholders were not immediately available for comment.
'Pyramid' corporate structure
IDB Holding owes NIS 2 billion ($540 million) while IDB Development owes NIS 5.8 billion ($1.6 billion) and its bondholders are seeking to have the company declared insolvent. The company did not comment on Sunday on the position with IDB Development bondholders.
Bondholders of IDB Holding and IDB Development, whose first-quarter results were issued over the weekend with a going-concern warning, last week forged a deal to give them full control of a combined company, contingent on court approval.
IDB Holding's bond prices were up 8-12%on Sunday afternoon.
Dankner had previously proposed a debt restructuring but bondholders have rejected any attempt by Dankner to reduce the amount of debt he owes.
Bondholders argue that IDB can only be successful if it reduces its number of ownership layers since the company can no longer support its debt load.
Conglomerates such as IDB make use of a "pyramid" corporate structure, using tiers of holding companies to allow a powerful shareholder to hold sway over a business empire while actually owning only a fraction of equity in the companies it controls.
Danker directly owns 6.7% of IDB Holding while Ganden Investments, a private company which Danker controls IDB, holds another 47.2%.
