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Bank Leumi's board of directors has approved $205 million in credit for Nochi Dankner's acquisition of control in IDB Holdings. Dankner's group is slated to provide $210 million in equity to finance the $542 million buyout.

The group will raise the remaining $127 million from other sources.

Three alternatives for this financing are currently being examined. One option is a loan from Bank Hapoalim, after Nochi and his father, Yitzhak Dankner, sell their stakes in Salt Industries, which holds 11.7 percent of the bank. Another option is a loan from a consortium of medium-sized banks. The third possibility concerns raising the money from institutional investors, including provident funds and insurance companies, but would require the approval of the Finance Ministry's supervisor of capital markets, insurance and savings.

At this stage, Nochi Dankner is acting in all three channels, planning to choose the fastest financing method.

A loan from medium-sized banks is problematic due to the group's capital and cross-ownership problems. Israel Discount Bank is 13.2 percent held by IDB and its capital adequacy is close to the minimum required ratio, meaning it cannot take part in financing the deal. Mizrahi Bank also suffers from a low capital ratio. First International Bank of Israel is capable of providing some of the credit for the deal, but due to the heavy losses the bank suffered on business sector credit, it will not take a significant position. Union Bank, Israel's sixth-largest bank, cannot provide any credit for the deal since Yitzhak Manor, a partner in Nochi Dankner's investor group, is a controlling shareholder in the bank.

The supervisor of banks has made Dankner's purchase of IDB contingent on his and his father's prior sale of their Bank Hapoalim holdings and the new IDB owners abstention from appointing directors to Discount Bank. IDB itself is currently prevented from appointing Discount directors due to the conviction of several senior managers from the group, notably Oudi Recanati and Eli Cohen, in the 1980's bank-share ramping affair.

A spokesman for Nochi Dankner's Ganden group said, "The group doesn't comment on matters associated with the financing of the IDB deal".