The Bank of Israel is conditioning the merger of the three cable television companies on the shareholders agreement not to withdraw funds from the merged company. Matav is the cable company that stands to lose out from the instruction as it has the lowest debt per subscriber ratio of the three companies and as a result was due to have received some NIS 500-600 million in compensation from the merged company.
As a result of the instruction, Dankner Investments, the controlling shareholder in Matav, will have to make do with a larger holding in the merged company and will have to raise the cash elsewhere. The company is currently in talks to bring Shamrock, the investment arm of the Disney family, in as a partner in Matav and thus cash in on some of its investment in the cable venture. Another option is that the other cable companies will issue a bond to Matav as an alternative to a cash payment.
Another obstacle to the merger that has yet to be solved is the issue of loans extended to Matav by Bank Hapoalim. The Dankner family is also among the controlling shareholders in Bank Hapoalim, making it a related party. Under Bank of Israel regulations, a bank is not allowed to extend loans of over 10 percent of its equity to related parties, but Bank Hapoalim has already surpassed the limit and the merger of the cable companies will exacerbate the problem.
The central bank has said it will allow Hapoalim to overstep limitations on credit to related parties with regard to the merged company, but is demanding that it set aside provisions for doubtful debt of 6 percent of the credit excess. The cable companies hope the financing problems for the merged entity will be solved by the end of March as the permit given by the Antitrust Authority for the merger expires at the beginning of April.
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