After the Fall / IDB's 'Great Day'

'The company raised NIS 420.6 million in Series 3 bonds, at 4.1% interest. Have a great day.'

The IDB group issued a single press release on Sunday, in which it said: "Good morning, [group subsidiary] Properties & Building scored a big success with its offering in the institutional phase, which was oversubscribed by NIS 705 million. The company raised NIS 420.6 million in Series 3 bonds, at 4.1% interest. Have a great day."

You'd have to be an incurable optimist to believe the celebratory tone of the only public relations statement issued Sunday by Israel's largest corporate group. Clearly, no one on the 44th floor of the Triangle Tower of Tel Aviv's Azrieli Center had a great day, nor was anyone there feeling as if a big success had just been scored. In fact, it was IDB's worst day since Nochi Dankner took control of the group. Here's why: The capital market increased its gamble on its earlier assessment that IDB, like the business groups controlled by Ilan Ben Dov, Yitzhak Tshuva, Yosef Maiman and Moti Zisser, will be unable to meet their debts to the public in full.

How can such a thing be known, if they have paid off all their loans up to now, and if Dankner has said in the past that there won't be any haircuts?

Assets that are traded on the capital market have a daily price from which a broader picture can be extrapolated. When a debt of one shekel is traded for well below that, it's a sign that the market has concluded that the chances it will be paid off are low. On Sunday, IDB Holding B4 series bonds, whose economic price is NIS 1.20, dropped to 51 agorot. The price is particularly low in that it reflects an annual yield of 25%.

And what does an annual yield of 25% mean?

That the purchaser of the bond is guaranteed that yield rate for the entire year, until the maturity date.

So maybe it's a good investment opportunity?

Maybe. Anyone who is convinced that IDB will pay off in full should run to scoop off its bonds. Index-linked yield of 25% is a terrific investment. Plus, up to now Dankner has made every effort to avoid a debt agreement, and that deserves our respect.

Nevertheless, you argue that the company is close to a debt agreement?

It's not me who is saying it, it's Mr. Market.

How did all this happen?

Through a lethal cocktail of circumstances: poor management, gambling on Credit Suisse and on land in Las Vegas, Communications Minister Moshe Kahlon's revolution in the mobile communication sector, cash acquisitions (Maariv and Israir ), weak performances by some of the group's companies, increased competition and inflated executive salaries, on top of the ongoing global economic crisis.