Fate of Scailex hinges on valuation of Partner unit
Bondholders may call in debt if Ilan Ben-Dov's firm is saddled with a 'going concern' warning today
Second-quarter results for Scailex Corporation, the holding company of embattled telecom entrepreneur Ilan Ben-Dov, are due out Wednesday, but as of Tuesday night its viability as a going concern was still far from certain.
Auditors Deloitte Brightman Almagor Zohar have had to contend with the question of whether to attach a going concern warning on their review of Scailex's financial reports. Such a warning could prompt bondholders holding NIS 1.8 billion in debt to demand immediate repayment.
The auditors' decision will depend on a revised valuation of Scailex's shares in Partner Communications, the company's key holding, to determine if its stake in the cellular operator needs to be written down in accordance with international financial reporting standard IAS 36.
Just last week, the Hutchison Whampoa investment group of Hong Kong canceled a preliminary agreement to acquire control of Scailex for $125 million, which owns 44.5% of Partner.
Taking on the urgent job of reevaluating Partner's value these past few days is Prof. Amir Barnea, considered one of the country's top financial appraisers, and Shelly Tshuva, partner and CEO of Trigger-Foresight, a business consultant firm.
This isn't the first time the two are performing a valuation of Partner for Scailex. Now, however, the stakes are much higher, as the assessment might force the company to reduce shareholders' equity. This could prove a decisive factor in determining the need to attach a going concern notation and thrust Scailex's operations into doubt for the foreseeable future.
Scailex clearly needs to sharply reduce the value of its investment in Partner. In their previous valuation, at the end of 2011, Barnea and Tshuva valued Partner shares at NIS 43.70 each, well above their NIS 33.70 Tel Aviv Stock Exchange market price at the time. But by the end of the first quarter of this year, Partner shares had dropped another 15% to NIS 28.60 - 34.5% under the company's book value.
Partner shares suffered a further double-digit decline between the end of March and late May, when the reports were published, after competition intensified in the cell phone industry following the launch of the two new low-cost cell phone operators Hot Mobile and Golan Telecom. Scailex, however, didn't revise the valuation of its Partner shares at that time, saying it would consider