Will the Troubles at IDB Ever End?

Partners Ben-Moshe and Elsztain are now talking through their lawyers.

From left: Nochi Dankner, Rabbi Yoshiyahu Yosef Pinto, and Argentinean real estate magnate Eduardo Elsztain.
From left: Nochi Dankner, Rabbi Yoshiyahu Yosef Pinto, and Argentinean real estate magnate Eduardo Elsztain.Credit: Assaf Saar Global

It seemed at the beginning of week that the final hurdle for the debt restructuring deal at IDB had been conquered when Cellcom received a draft of its new license approving the transfer of ownership to the new group headed by Moti Ben-Moshe and Eduardo Elsztain. But on Tuesday, new problems appeared.

Now it seems that even if the deal is finalized on schedule next Wednesday, the mutual accusations hurled by the two new partners casts doubt on whether management could hold together for any period of time.

IDB Holding Corp.'s financial report to the Tel Aviv Stock Exchange on Tuesday included an exchange of harsh letters between the Elsztain's lawyers and Ben-Moshe’s lawyers. Included the correspondences from the last two weeks are the two court appointed trustees in the debt settlement, Hagai Ullman and Eyal Gabai.

The letters hint at disputes between the partners as to Elsztain's personal responsibility to hold a rights issue, as well as future buybacks of IDB Development shares worth hundreds of millions of shekels.

The trustees wrote to Elsztain that while his intention to set up a special purpose vehicle company in order to take part in the future investments was not a problem in itself, they still made it clear that they expected Elsztain to retain personal responsibility. His lawyers said this was unacceptable, but that he still stood behind his past promises. Ben-Moshe’s Extra Holdings told IDB it objected to Elsztain’s plan to set up the SPV, saying there was reason to fear Elsztain would not meet his commitments.

In addition, the Israel Securities Authority has requested that both Ben-Moshe and Elsztain submit the financial reports of their various companies involved in the deal in accordance with the IFRS international accounting standards. Elsztain said he no problem doing so, but Ben-Moshe said it would take months to do and that he could not meet the ISA’s deadline for approval of the deal. Since he could not meet the deadline, the ISA demanded that Ben-Moshe put up 150 million shekels in guarantees for his future investments.

In any case, sources close to Ben-Moshe told TheMarker thathe would have no problem putting up the 150 million shekels if Elsztain did not come up with his share. Ben-Moshe told TheMarker the ISA’s demands are not new and came only because Extra is a privately held firm and files its reports according to German laws.

IDB Development lost 153 million shekels in 2013

The financial reports showed that IDB Development lost 153 million shekels in 2013, down from its huge 733 million shekels loss in 2012. It lost 48 million shekels in the fourth quarter of 2013. The reports also still carry a “going concern” warning from its accountants. The company has a 672 million shekel equity deficit as of the end of last year. IDB Development owes banks, bondholders and others over 4.5 billion shekels.

IDB Holdings lost 451 million shekels in 2013, compared to a 947 million shekels loss in 2012.

The reports also show that former CEO Nochi Dankner’s salary cost IDB 1.9 million shekels last year.

Moti Ben-Moshe.Credit: Ofer Vaknin
Eduardo Elsztain, above, and his partner Moti Ben-Moshe seem too busy squabbling to bring order to their unwieldy financial house.Credit: Daniel Bar On

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