Sonol, in dire financial straits, likely to accept Gaydamak's lower offer

Arcadi Gaydamak is interested in purchasing Sonol for $130 million, lower than the $155 million Dor Alon agreed to pay for the company, according to capital market sources.

The sources estimate the Borovich family will agree to Gaydamak's price, owing to its need for cash, and the financial situation of Sonol.

The sources said the price takes into account Sonol's massive debt of more than NIS 2 billion, mostly to Bank Hapoalim and Bank Leumi.

Sources close to Gaydamak said that considering Sonol's dire financial state, the deal is not financially worthwhile, but Gaydamak will promote it nonetheless to gain legitimacy in this country. The local business community treats people like Gaydamak, whose fortune comes from weapons and diamonds in Africa, with suspicion, even though he claims his money was made honestly. Sources close to Dor Alon also said the company's condition was extremely dire.

The Gaydamak sources added that even though he and his partner, Avshalom Nuriel, have signed a memorandum that states that ownership of Sonol will be shared equally, it will be Gaydamak who pays most or all of the amount.

They say Nuriel does not have the money to fund the deal, and that his contribution to the deal is his ties with the Boroviches, stemming for their joint stake in Knafaim, which owns El Al. Nuriel has been responsible for all contact with Dedi Borovich up to now.

Sonol's assets are estimated to be worth NIS 1.5 billion.

Sources close to the company said the firm's debts mostly stem from the fact that the company has aggressively entered the institutional market in recent years; i.e. selling fuel to companies. In the business sector, fuel is usually paid for after a minimum of 90 days, whereas Sonol has to pay the refineries after 15 days. This means a gap of 75 days, which the company funds through bank credit.

Sonol is the largest credit consumer of the Granite Group, and this conduct has a price. In 2005 the group's financing costs totalled NIS 150 million, mostly because of credit taken by Sonol. This almost completely erodes the group's operating profit.

The sale of Sonol will bring two main advantages to Granite. The first is the removal of Sonol's commitments from its consolidated balance sheet, and the ability to use the payment to reduce the group's debts. Secondly, the sale will generate capital profits of NIS 200-300 million, which shareholders will be able to withdraw as a dividend.

Sonol had not responded to this report at the time of writing yesterday.

Granite Hacarmel Investments has no profits worth distributing as dividends today, and the money made from the Sonol deal could certainly change this.

Glencore International and the Boroviches, the owners of the Granite Group, also have a debt estimated at $130-140 million to Bank Leumi, which funded the group's purchase of Sonol.

	Arcadi Gaydamak