The fundamental elements of the IDB group’s arrangement with its bondholders representatives of institutional investors who should be the guardians of the public’s money illustrate problematic policies in the capital market and compromising management of public funds.
In the framework of the arrangement, the flow of cash from stockholders to the company will be NIS 235 million, which is minuscule in the face of a debt of approximately NIS 2 billion. Even if more cash flows in the future, as the arrangement states and that is doubtful the investing public will still get a “haircut” of more than 50 percent of the investment. That is, about half of the debt to the public will be wiped out. The repayment of the rest of the debt depends on the management of Nochi Dankner, whom the arrangement leaves as the company’s principle shareholder and that is the main problem.
Dankner has proven unqualified to head the group of companies and is not worthy of further credit of more than NIS 1.5 billion of the public’s money. We should recognize the facts: as a business executive Dankner was interested in amassing power and promoting his image, not in making profits. He paid overblown salaries to senior executives, but they did not carry major weight. He acted like a soloist and caused his companies to deteriorate with his failed and corrupt decisions, which led to a crisis. These included his over-leverages and huge distribution of dividends, the purchase of Gandan Tourism, of stock in the Swiss bank Credit Suisse, of a lot in Las Vegas during the real estate bubble and of the daily Ma’ariv.
The only explanation for the agreement by the representatives of banks and the creditors to the arrangement is the special relationship Dankner enjoys because of the power and influence he has garnered over the years in large segments of Israel’s economy in general, and in the capital market specifically, which may have been among the factors leading to the removal of his cousin, Danny Dankner, as chairman of Bank Hapoalim. Too many people owe him, apparently, and they pay him in public money in an unjustified arrangement. The bondholders and the court must reject the current proposed agreement and demand instead a formula that is clear, simple and fair: Dankner should either bring an amount in cash that will ensure that the debt is paid, or transfer control and management of the company to the public, which will know how to hire executives who are able to offer a real chance at minimizing the damage Dankner did.
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