IDB Bondholders in Counter-offer to Dankner

Redemption would begin three years after signing, with annual payouts for seven years; IDB Holdings says they cannot accept deal as is but view it as an opening for negotiations.

Last week, IDB Holdings, controlled by Nochi Dankner, offered its bondholders a debt restructuring scheme that involved a ‘trim’ amounting to NIS 500-600 million. Bondholders’ representatives, from Excellence, Harel Pia and Gilad Pension Funds, have now come back with their counter-offer.

As of today, IDB Holdings debts amount to NIS 2.05 billion. Of this, NIS 155 million is owed to Credit Suisse, NIS 125 million to Bank Leumi, and the remainder to its bondholders. Their representatives now propose that with the signing of an agreement the old debt will be erased, and a new bond series issued to banks and bondholders, with a capital of NIS 1.43 billion. In addition, NIS 600 million must flow into IDB Holdings coffers.

The representatives’ proposal includes redemption starting three years after signing, with annual payouts continuing for seven years. Annual interest rates will be 2.5% for the first two years, linked to the cost of living index, and 5.5% in the third year, paid up front. From the fourth year on, annual interest rates will be 8%.

Given the great uncertainty that IDB Holdings will abide by its commitments under the new schedule, bondholders demand putting a lien on all shares of subsidiary IDB Development as security. They suggest putting in place an agreed-upon mechanism for releasing this security as payments are made. Bondholders also agree to keep Dankner on as controlling shareholder in IDB Holdings, conditional on a NIS 400 million injection into its coffers. The company had suggested NIS 140 million. These funds, if they ever materialize, will come from investor Eduardo Elsztein.

The bondholder reps also included a demand for a further NIS 50 million flow in the second year of the new arrangement, with further injections of NIS 50 million and NIS 60 million in the third and fourth years, respectively. Bondholders also demand obtaining 20% of IDB Holding’s shares, currently valued at NIS 109 million, as well as 10% of IDB Development. They further want to make new appointments to the board of directors, as well as placing observers on their behalf on the board. They also call for several cost-cutting measures, noting that company directors and shareholders should no longer profit from a company that is in such deep debt.

Responding to the counter-offer, IDB Holdings said that they view these demands as an opening strategy in the negotiations, which they cannot accept as proposed.

Ilan Assayag