It ain’t over till the fat lady sings, and the IDB group’s debt settlement won’t be over until Judge Eitan Orenstein sounds the final note.
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Whatever happens, the vote taken by creditors over the two proposals for the holding group’s restructuring was a monumental moment. IDB creditors opted Sunday night to take the company away from its controlling shareholder, Nochi Dankner, and hand it over to a set of new owners – the Elsztain/Ben-Moshe consortium. Never before was there such an upset in such a major concern with such huge financial implications.
The IDB settlement sets a precedent for many more of the same kind, and the truth needs to be said: The court went out of its way to accommodate Dankner before it finally issued the verdict taking IDB out of his hands and turning it over to the creditors, and from there apparently to the new controlling group.
The restructuring, which at the start carried a sense of urgency, in fact lasted more than half a year. During that time, Dankner was given many opportunities to extract the company from its cash-flow quagmire, but to no avail.
According to the law, at least 75% of the creditors are required to support a restructuring proposal in order to win the court’s approval. This special majority was achieved Sunday night.
The final round will be the court hearing to approve the settlement, on December 15. It is reasonable to assume that the losing side will do all in its power to deny the validity of the restructuring arrangement. For example, the Elsztain/Ben-Moshe group – comprised of Argentinian Eduardo Elsztain and Israeli Motti Ben-Moshe – could be accused of forming a pyramid of companies above IDB, but such a claim would be weak.
First, Elsztain’s companies are publicly traded and based overseas, and Israel’s new business concentration law doesn’t apply to them. Second, Elsztain’s corporate structure exhibits a relatively small degree of leverage, thereby creating less risk to creditors. And third, Elsztain committed himself to not drawing dividends for a long time, thereby assuring creditors that the company won’t service debts in the immediate future.
Another argument the Dankner-Granovsky group could make is that Judge Orenstein once ruled that a debt restructuring can’t be imposed on a company that rejects it, nor serve as a means of seizing control.
Although the judge has already indicated that the IDB settlement differs from cases in which he’s previously presided, the question will likely be raised again. It might even reach the Supreme Court on appeal if the Dankner-Granovsky group continues fighting to the last drop of blood – or the last shekel.
And Dankner has good reason to fight to the very last shekel. The day after he loses control of IDB will be a very grim day for him. Once the settlement is approved, IDB’s controlling shares will be transferred to the Elsztain/Ben-Moshe group.
The new controlling group will convene a general shareholders meeting to appoint a new board of directors for IDB. Unless an angel appears on earth or an esteemed rabbinic luminary from Ashdod arrives to enrapture Dankner and Elsztain with mutual peace and love, it’s a fair guess that Dankner will no longer be sitting on the board – certainly not in the chairman’s seat.
At the same time, two new fronts will open against Dankner. The banks that loaned money to his closely held investment vehicles, Tomahawk Investments and Ganden Holdings, will likely begin proceedings to collect these debts. Dankner will be joining a string of tycoons, like Ilan Ben Dov and Moti Zisser, who have been taken on personally by the banks for the repayment of their debts.
A saga of personal lawsuits against Dankner, the IDB board and its officers will also ensue. How did Dankner bring about IDB’s current predicament and will he pay for it – and, if so, for what and how much? The courts will be dealing with this for many years after Dankner vacates his seat.