IDB Holding Corporation’s board opted Sunay against continuing the legal battle to block a court-sanctioned takeover of the indebted conglomerate.
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The decision came a week after Tel Aviv District Court Judge Eitan Orenstein approved a proposal by Argentinian investor Eduardo Elsztain and Israeli Moti Ben-Moshe to rescue the holding company from billions of shekels in debt by injecting new cash into it and swapping debt for equity.
IDB controlling shareholder Nochi Dankner and Ukrainian businessman Alexander Granovsky had proposed a rival plan for bailing out IDB, which was backed by the company itself but rejected by creditors. After the court issued its ruling last week, Dankner vowed to appeal it.
“Although the position of the board was that the proposal formulated and submitted by the company and the investor group was the best for the company … the company will not continue to carry the costs needed to pursue it,” IDB said in an announcement to the Tel Aviv Stock Exchange.
The IDB group as a whole had spent some 17 million shekels ($4.8 million) supporting the Dankner-Granovsky plan, of which 6 million shekels was spent by IDB Holding, the company that sits at the apex of the group.
The board’s vote came as an investigating team was in Germany examining the books of Ben-Moshe’s German-based company, Extra Holdings.
The investigators, representing the government and a court-appointed observer for IDB, will visit Extra’s head offices, meeting with Ben-Moshe and examining its books over a period of three days.
In particular, they will be looking for any sources of money in the company that were not generated by Extra’s actual business, at least for 2012. Ben-Moshe has said he is prepared to open all his books.
They will also be examining Extra’s business operations, including how energy, the company’s core business, is regulated in Germany. They will also be checking whether Extra’s operations can generate sufficient cash to meet Ben-Moshe’s commitments to the IDB rescue plan.
The probe was ordered by Orenstein as a condition for final approval of the Elsztain-Ben-Moshe bailout plan. Dankner and others have called into question how Ben-Moshe – a self-made millionaire who earned his fortune in Germany through a closely held business empire – acquired his money.
Orenstein has set a December 29 deadline for submitting information confirming that Ben-Moshe and Elsztain can meet their commitments to the rescue plan.
Court approval of the Elsztain-Ben-Moshe proposal threatens to create new problems for Dankner, whose bank creditors are awaiting the final outcome of the IDB saga before acting on Dankner’s personal debt.
Dankner has two closely held investment vehicles, Tomahawk and Ganden Holdings, that between them owe banks between 800 million shekels and one billion shekels.
Tomahawk, which is wholly owned by Dankner, owes 150 million shekels to 200 million shekels to Bank Hapoalim, 100 million shekels to Israel Discount Bank, 50 million shekels to Switzerland’s Credit Suisse and 30 million shekels to Mizrahi Tefahot Bank.
The three Israeli lenders declined to comment on their course of action. Dankner provided personal and other guarantees for the loans but it is not clear how much those are worth.
He recently transferred title to a major asset, his 40-million-shekel home in Herzilya Pituah, to his wife, Orly.
The lenders stand a better chance of recovering their loans from Ganden because Dankner has partners in the company, most notably Elsztain. The Argentinian businessman put 100 million shekels into Ganden earlier this year, when he was still a partner of Dankner’s, and now holds 10%.
Other major partners include Dankner’s sister, Shelly Bergman (11.2%); Jacob and Marc Schimmel (9.2%) and Avi Fischer (7.9%).
Most of Ganden’s debt — some 450 million shekels — is held by Bank Leumi, with another 80 million held by Mizrahi Tefahot. Leumi holds guarantees worth 150 million from all the Ganden partners. Sources in the banking and legal sectors say the bank is likely to move on the guarantees shortly.
Leumi has gone after the private assets of other tycoons, including 60 million shekels worth of real estate owned by Ilan Ben-Dov, who had put up personal guarantees for his Tao Tsuot.