Exactly a year after the debt bailout for IDB Group was put in place, installing Eduardo Elsztain and Moti Ben-Moshe as controlling shareholders, Ben-Moshe has been pushed out of his post as joint chairman.
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The board voted late Thursday to oust Ben-Moshe as co-chairman of IDB Holding Corporation, the company that sits atop the group. That leaves Elsztain, an Argentine real estate magnate, as the sole chairman and controlling shareholder. Ben-Moshe remains on the board but only as a director.
The stock market cheered the decision on the assumption that it would end months of bitter disputes between the two men that slowed efforts to inject more capital into IDB and turn it around. On Sunday, IDB Holding shares jumped 7.1% to close at 1.52 shekels (39 cents).
The board voted after Elstzain conditioned injecting a further 250 million shekels ($64.6 million) into IDB on his being named sole chairman. Without the money, IDB might have been forced to seek a new debt accord with creditors.
Elsztain’s demand was triggered by Hermetic Trust Services, which called on Elsztain to move forward a first payment of 150 million shekels to May 20 from a July 19 deadline.
Hermetic, which represents holders of long-term bonds, was concerned that cash reserves at an IDB Holding subsidiary, IDB Development Corporation, had shrunk to just 100 million shekels after short-term bondholders were repaid some 400 million shekels.
Elsztain is injecting the additional capital into IDB Holding as part of the 417-million-shekel rights offering he engineered for IDB over Ben-Moshe’s objections in February. Ezlstain took part, increasing his IDB stake to 61.5%, while Ben-Moshe refused, cutting his stake to just 16.2%.
Elsztain will be handing over another 100 million shekels to IDB in October or November when the next cash call of the rights offering is due.
In the meantime, IDB’s finances remain shaky, which moved the board Thursday to appoint a committee to negotiate with bondholders and banks. The idea is to adjust the benchmarks for the company’s financial performance that would let creditors call in loans early.
Another committee was named Thursday to develop a business and financial strategy for the holding company, whose assets include Super-Sol, Israel’s biggest food retailer, and Cellcom, its biggest mobile operator.
The latest 250-million-shekel cash injection puts Elsztain’s total outlay for IDB at more than 1.35 billion shekels. With IDB’s market value at about 870 million shekels, the Argentine’s holding is worth about 530 million, not counting the 250 million he might inject. As a result, Elsztain has run up a paper loss of about 600 million shekels on his investment.
Ben-Moshe, an Israeli who made his fortune in Germany, has invested 700 million shekels in IDB and now has a paper loss of 550 million.
The two men were divided by different business styles and strategies for IDB, which is weighed down by debt of 4 billion shekels largely accumulated under its previous controlling shareholder, Nochi Dankner, and by problems at many of its biggest subsidiaries. Its bonds trade at junk yields of 14% to 28%.
Elsztain and Ben-Moshe are now in arbitration over the terms of the February rights offering that cut down Ben-Moshe’s holding, which observers say is likely to lead to a final breakup of their partnership.