Embattled tycoon Nochi Dankner turned to the Supreme Court Sunday in a bid to reverse the takeover of his IDB group by the Elsztain/Ben-Moshe consortium.
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In a petition to the court, Dankner claimed that Tel Aviv District Court Judge Eitan Orenstein’s decision in December 2013 to hand over IDB to the Elsztain/Ben-Moshe group violated Israeli bankruptcy law, was unduly influenced by public sentiment and was not in creditors’ best interest. Dankner’s attorney, Shmulik Cassouto, asserted that Orenstein had awarded the holding company to figures engulfed in suspicion about the source of their funds – an apparent reference to rumors about Moti Ben-Moshe’s alleged ties to prostitution or organized crime.
“The court’s decision was influenced in no small part by an atmosphere of hostility against Dankner that was inflamed and generated by the interested parties from among institutional investors and ExtraHolding [Ben-Moshe’s German company],” said Cassouto. “It is hard not to feel that, in its rulings, the court was swept up by the public’s call to punish Dankner for his alleged business failures.”
The appeal comes almost a month after Orenstein approved a bailout plan devised by Argentinian Eduardo Elsztain and Israeli Ben-Moshe, calling for the injection of hundreds of millions of dollars into the indebted conglomerate, while swapping much of its debt for equity.
Although the institutional investors and banks to whom it owes billions of shekels backed the plan, Dankner has fought bitterly to retain control of IDB – whose businesses include the food retailer Super-Sol and the cellphone operator Cellcom Israel – and which made him one of Israel’s most powerful business figures.
Cassouto said the restructuring offer proposed by the group of investors assembled by Dankner would give creditors 160 million shekels ($45.7 million) more than the Elsztain/Ben-Moshe proposal.
Dankner’s attorneys questioned Orenstein’s decision to invalidate the first vote of creditors over the restructuring proposals, which Dankner’s group won. They claimed in court that, under Israeli law, no restructuring agreement can be enforced upon a company against its will if a liquidation order has not been issued, as was the case with IDB Holding.
“This was a hostile takeover of the company by means of the bankruptcy court without any of the sides actually entering insolvency proceedings,” Dankner said.
Attorney Raanan Kalir, representing the Elsztain/Ben-Moshe consortium in court, said that, based on previous court rulings, Dankner lacked the legal standing to file an appeal. Kalir asserted that a shareholder can only appeal a liquidation order by asking a corporate officeholder to appeal a ruling based on the company’s best interests.
“It is hard to think of a more unfounded petition than the motion to annul the ruling and reconsider the case,” Kalir said. “It appears that the appeal stems from vindictiveness, with the goal of hurting Ben-Moshe and Elsztain by repeating the groundless slander [against them] and the creditors who dared not to choose the proposal by Dankner’s group of investors and make things difficult for them to complete the restructuring.”
Before Orenstein gave his final approval of the Elsztain/Ben-Moshe proposal, he sent a team of investigators to examine Extra’s books. No evidence of any irregularities was found.
Cassouto said Dankner had been unfairly demonized in public for forcing creditors to give up 600 million shekels of the debt IDB owed them, even though other tycoons had forced much larger, so-called “haircuts” on creditors.
Yitzhak Tshuva, Cassouto said, forced creditors to write down 2.15 billion shekels of Delek Real Estate debt; Idan Ofer, controlling shareholder of Israel Corporation, made creditors of Zim Integrated Shipping Services take a 50% haircut – equivalent to $1.5 billion; and property developer Motti Zisser compelled his creditors to write down half of his Elbit Imaging’s debt (some 1.8 billion shekels).
“Yet Dankner became the public’s punching bag,” said Cassouto.