/ By Alan Gallindoss /
Globes today reports that Nochi Dankner continues to fight to keep control of his IDB group of companies with a new four part offer to the group’s bondholders who are seeking to have his companies declared insolvent.
The first element of the new proposal just tabled offers payments to bondholders of NIS 640 million. This is comprised of NIS 375 million of new money after closing his deal with Eduoardo Elsztain, plus NIS 165 million which is the lion’s share of the company’s own existing cash reserves and then another NIS100 million which is to be paid over a period of years.
Second, he offers them a 10% equity stake in each of the IDBH holding company and the IDB Development operating subsidiaries.
Third, he apparently proposes a new bond series of NIS 700 million with an inflation linked 5% initial coupon and maturities of 4 to 8 years.
Finally, additional sources of up to NIS 400 million may be tapped through either asset sales (already tried) or by finding additional new investors (also already tried).
It is a curious proposal as little of it is really new and the proposal to have a new bond issue seems essentially like an effort to buy-off the bond holders with their own money. In addition, 10% of the reportedly insolvent and, therefore presumably currently close to worthless, operating company’s equity is also offered. Otherwise the elements are similar to previous proposals.
The real issue now for the bond holder representatives is down to the simple question of whether they want him or someone else to lead the company and rebuild it, and whether the various institutional shareholders share their opinion when crunch time comes. It is also to Dankner’s credit that he continues to fight for his company. A prudent book-maker would not make odds yet on the outcome, I feel, though much may also depend on seemingly invisible and extraneous outside factors such as whether the business elites are circling the wagons around him at this point to offer support through the institutions behind closed doors, or whether they feel it is on balance better to let him be cut adrift at this point.
With the increasing populism currently circulating in the country and its resulting impact on politics – and therefore also on business – a ritual sacrifice of someone in trouble might not be ruled out. The only real criterion though should be related to the question of whether his management skills are sufficient to be the leader who restores the company to something like its former heights, or not. In part how hard he fights to save it will be a measure of the answer to this question. Watch this space.
Simultaneous with all this IDBH and IDB Development have both just published their 2013 first quarter results, and the accounting opinions that are included therein indicate going-concerns warning for both – something new in the case of IDB Development; this may be unfortunate timing from Nochi Dankner’s perspective.