IDB Development Corporation asked the Supreme Court on Sunday to reverse a lower court's ruling that the company sell its holdings in Clal Insurance by August and convene a creditors meeting to work out a debt-restructuring plan.
- Access Offers to Take Clal Private
- In New Blow to Dankner, Argentinian Investor Withdraws IDB Investment Offer
In fact, IDB asked that all of Tel Aviv District Court Judge Eitan Orenstin's operative decisions concerning the company be revoked. Instead, IDB said in its appeal, Orenstin's court should rule on the question of whether the company is solvent before issuing any further instructions.
The IDB petition also seeks to extend until October the deadline to sell its stake in Clal Insurance, claiming that Orenstin's August 22 deadline "impinges" on the company's ability to maximize the price it could get for the business.
"Any potential buyer aware of the fact that the company is approaching a forced settlement and a fixed timetable for divesting the asset will obviously try to make the best of it and offer a price appropriate to a sale under pressure," IDB argued. "The order undermines [IDB's] ability to maximize the asset's value."
Together with its parent company IDB Holding Corporation, IDB Development is grappling with some NIS 8 billion in debt. Controlling shareholder Nochi Dankner hopes to use the proceeds from a Clal Insurance sale to help repay the debt coming due.
IDB explained that Orenstin's June 9 ruling set a precedent that runs contrary in part to basic principles in the laws regarding insolvency, and has no legal basis. The company pointed out that the steps dictated by the judge appeared at face value to be temporary but are, in fact, irreversible.
"Beyond their being erroneous from a legal standpoint, they are dragging the company into a legal and financial tailspin and placing it under impossible business conditions," IDB wrote.IDB explained that its quality assets and capacity for liquidity enable it to pay its debt, arguing that the insolvency proceedings being taken against it are "for one purpose: wresting control over its enormous surplus of assets."
The petition attacked the repayment test on which Orenstin based his ruling. "A company that can't prove its cash flow repayment capability with high certainty for two years ahead will be exposed at any given moment to be declared 'an insolvent corporation,' or at least a corporation in an 'insolvent environment,'" warned IDB.