The Argentine Jew Who Wants to Save IDB

In an interview with Haaretz, Argentine tycoon Eduardo Elsztain explains why he wants to help Nochi Dankner salvage his debt-ridden concern.

Until a few months ago, Argentinean-Jewish tycoon Eduardo Elsztain was unknown in Israel. He amassed his fortune in real estate in Argentina, Peru and the United States. But ever since he committed himself to investing in IDB, the huge financial concern, in a way that might enable Nochi Dankner to retain control of it, many have begun to wonder who is this mysterious savior. What prompted Elsztain to take the troubled business concern under his wing?

In an interview with Haaretz, conducted during his current visit to Israel, Elsztain said that he is full of plans for IDB’s future, saying the group “must reduce costs by reducing management costs.” While he doesn’t say so explicitly, it’s clear that he plans to streamline the company by significantly reducing the pyramid levels and cutting legal expenses.

The IDB group is sinking under some NIS 8 billion in debt. The attempt by Bank Leumi to waive some of Dankner’s debt generated such a public outcry that the bank had to withdraw the offer.

Elsztain likes the fact that IDB’s assets are “real assets.” “IDB has one of Israel’s leading insurance companies [Clal Insurance], one of Israel’s leading telephone companies [Cellcom] and Israel’s leading supermarket chain [Supersol]. These are excellent assets to which I want to add value,” he said. He refused to disclose any specific plans regarding these companies because he has not yet discussed them with his partners.

He says he is not worried about Israel’s economic troubles, which are expected to erode the buying power of the average Israeli. In fact, he believes in the Israeli economy, which he calls “strong and competitive.”

Elsztain said he has been in Israel at least 40 times since he was a teenager. During the 1990s he invested in Alfred Akirov’s Alrov real estate firm, but other than that he had no business interests in Israel.

It was Rabbi Yoshiyahu Pinto, an old acquaintance, who introduced him to Dankner. This past Rosh Hashanah eve, when Elsztain came to Pinto to receive the latter’s blessing for the New Year, the rabbi asked Elsztain to meet with Dankner to advise him on how to deal with the crisis at IDB. After that meeting, Dankner asked Elsztain to become a partner in the group, and Elsztain agreed. The negotiations between them lasted a few months, and included six meetings in Israel and another three in New York. Before making his final decision, Elsztain got a blessing for the endeavor from Rabbi Pinto.

“The rabbi said that the livelihoods of hundreds of thousands of Jews are dependent on the survival of this company, and that there’s also a business opportunity that’s not bad,” he said. “The rabbi didn’t get involved in the financial considerations, assets versus liabilities and the like, but asked me to get involved.”

Asked if he considers this a charitable donation, he gets annoyed. “It’s business,” he replies emphatically.

At Elsztain’s side during the interview was his right-hand man, Sholom Lapidus, a young Chabad Hassid from Argentina and a member of one of the Jewish community’s prominent families. Lapidus will be moving to Israel to serve as Elsztain’s full-time representative. Elsztain will soon be flying to Rome and from there back to his home in Buenos Aires. He has no plans to live in Israel, but says he will be here as often as needed. He sees himself as an active partner and plans to sit on the IDB board.

Asked to describe his partnership with Dankner, he said, “It’s not a matter of who’s in charge. I see this partnership as one in which everyone gives the company what it needs.”

He is too polite to give grades to IDB’s financial management. “It’s not fair to judge its management over the past year,” he said.

By order of the Tel Aviv District Court, during the next two months Dankner will have to raise NIS 1.2 billion to redeem his debt to IDB’s bondholders. The judge set down a plan under which Dankner would pay NIS 400 million, while the other NIS 800 million could come from the sale of Clal Insurance, in which the value of IDB’s stake is estimated at NIS 2 billion. If Dankner can come up with more than NIS 400 million, he may be able to retain a stake in Clal Insurance.

Elsztain, however, would prefer to raise the entire latter sum from third parties because “to sell a company like Clal Insurance in such a short time frame is no good. We will sit with the partners and try to raise the whole amount.”

At a press conference last week at IDB’s offices, Elsztain said that he has another group of investors behind him. He will not reveal who they are, or whether they are Jews or not, saying he will do so at a later stage.

During the next two months, in accordance with the court ruling, Dankner will be negotiating with the bondholders. Meanwhile, Elsztain’s money will remain in trust. Afterward, Dankner will have to resolve the problems he has with outstanding loans. Elsztain doesn’t seem too concerned about this, either.

“After we take care of IDB, we’ll be able to arrange the debt at the top [of the pyramid],” he said.

Daniel Bar On