Bank Leumi Wonders: Is Eduardo Elsztain Pulling Back From Nochi Dankner?

People at Bank Leumi are starting to suspect that the would-be white knight of the IDB group is reneging. The debt deal with Dankner is contingent on it, though.

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People at Bank Leumi are starting to suspect that the would-be white knight of the IDB group is reneging.

IDB Holding Corp, the company at the top of the IDB group, has a going-concern warning on its last financial statement (for the last quarter of 2012). Its controlling shareholder, Nochi Dankner, is meanwhile struggling to reschedule personal debts as well. The Argentine businessman Eduardo Elsztain was expected to invest in Ganden Holdings, the firm through which Dankner owns the IDB group, injecting enough capital to appease the growling watchdogs. Now his intention to invest seems to be in question.

Meanwhile Bank Leumi has also been rethinking a plan to forgive some of Dankner's personal debt, following a public outcry that followed TheMarker’s exposure of the proposed. The proposed debt rearrangement would have erased NIS 100-200 million from a total debt of NIS 450 million.

Formally, the bank, headed by Rakefet Russak Aminoach, has frozen any such erasure after the banks watchdog, bank supervisor David Zaken, said he would be investigating the matter. But top sources at Bank Leumi said that behind the scenes - talks are being held with Eduardo Elsztain in order to establish whether he intends to abide by the plan that was formulated, but not signed, with Dankner.

Leumi’s entire deal with Dankner hinges on cash flow of more than NIS 100 million from Elsztain, as well as on fulfilment of certain conditions that would minimize financial harm to the bank resulting from the plight of IDB Holdings and from the inability of Dankner and his partners to fully repay their debt to the bank.

“The impression of officials at Bank Leumi and others involved in the affair is that Elsztain may be wavering and showing signs of pulling out of the deal," said bank officers involved in the negotiations.

IDB Holdings bondholders are also queasy about Elsztain, who is expected to invest a further $75 million in Ganden, most of which will go to IDB Holding.

In addition, dissatisfaction was expressed at the fact that Leumi would be receiving a disproportionately higher amount of cash relative to Dankner’s debt, not in accordance with agreements made with representatives of IDB Holding bondholders.

Argentinean investor Eduardo Elsztain, left.Credit: Haaretz

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