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Credit ratings agency Maalot yesterday downgraded its rating of real estate company Azorim Properties, controlled by Nochi Dankner, by two grades from A to BBB+.

Azorim deals in yield-producing properties and was bought from IDB by Dankner's Ganden in August 2001. Ganden delisted Azorim with a buyback offer in July 2002. Azorim has two series of bonds worth NIS 230 million that were issued in January and May 2002.

Maalot downgraded the bonds due to some of the developments involved in the Dankner-led buyout of IDB, and the Ellern restructuring deal being led by other members of the Dankner clan. Azorim decided in the summer of 2002 to buy Israel Salt Industries shares from Nochi Dankner for $15 million, and sell some of those shares to Ellern Holdings for $5.7 million. The Salt deal was never exercised.

Maalot was also concerned to discover that Azorim had granted a NIS 250 million loan to its parent company Ganden in April 2003. The loan repayment terms are similar to those in Azorim's corporate bonds, with an interest rate margin of 0.5 percent. Maalot stated that, since the loan to Ganden is unrated, the agency is unable to determine the repayment capability.

Maalot believes that using its cash for the loan to Ganden, as well as the Salt shares deal, are not part of Azorim's core business. These steps substantially raise Azorim's financial and business risk. Maalot said the loan reduced Azorim's liquidity, its debt coverage capability, and damaged its ability to cycle debt.