Tel Aviv District Court Judge Eitan Orenstein on Sunday rejected a petition by bondholders to hand them control of Nochi Dankner's IDB group in a debt-for-equity swap.
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Orenstein gave IDB Development Corporation until August 22 to sell its Clal Insurance unit as a means of raising cash, and authorized it to make an NIS 800 million payment that is due soon to bondholders.
"We have to enable the company to operate without a sword hanging over it," Orenstein said in his decision. "The company will pay the debt that is coming due shortly – totaling NIS 800 million – to the observer appointed by the court, Hagai Olman."
Orenstein ordered Olman to devise a recovery program by July 7 for the group, whose top two companies – IDB Holding Corporation and IDB Development – owe some NIS 8 billion to bondholders and banks.
Bondholders had sought court approval for a plan to erase much of the debt in return for getting a controlling stake in IDB Development. That would have left IDB financially stronger and put the bondholders in control of a business empire that includes many of Israel's best-known companies.
Dankner – who has fought off bondholders' efforts, including this weekend with a revised bailout plan for IDB – expressed only mild satisfaction with the decision. "The extension the judge gave to sell Clal Insurance is short and challenging, but we will work hard to meet it," he said.
"There is no doubt that an agreement reached [between the parties] is preferable to any court decision," the judge said, criticizing what he said was the inability of IDB management and its creditors – including the bondholders and the banks – to conduct negotiations that would lead to an orderly restructuring of the holding group's debts.
"It is a little strange that the two sides haven't succeeded in arriving at an agreement," he said. "The two sides are afraid to talk to each other lest it be interpreted as an admission that the company is in trouble," he said. "They are petitioning the courts instead of talking with each other. I can only hope what I have to say is getting through."
Regarding a written statement by Argentinean real estate mogul Eduardo Elsztain promising to inject cash into the IDB group, Orenstein said: "There is no commitment that would alter the situation right now. We're talking about a general statement not supported by the affidavit."