If the Clal Insurance sale collapses, IDB Development is in deep trouble.
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IDB Development Corporation Ltd. (TASE:IDBD) today attached a going concern warning from its auditor to its financial report for the first quarter of 2014, its first financials since returning to the Tel Aviv Stock Exchange (TASE). The reason for the latest warning is the uncertainty over closing the sale of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS).
“The company’s financial report for March 31, 2014 includes a clarification and draws attention to the serious doubts about the continued existence of the company as a going concern, ” says IDB Development in its statements. “This is because of the company’s financial condition, including the shareholders’ equity deficit and cash needs to repay its commitments due to the need to arrange the criteria applying to the company under agreements with borrowers, as well as uncertainty over closing the sale of Clal Insurance.”
It adds, “As of the date of the publication of this report, the likelihood of closing the sale of the company’s holding in Clal Insurance have been greatly reduced and are now low.”
IDB Development’s shareholders’ equity deficit was NIS 557 million (about $160 million) at the end of March, and its financial commitments totaled NIS 4.7 billion (about $1.34 billion). Net profit nearly doubled to NIS 292 million (about $91 million) for the first quarter from NIS 159 million (about $45.5) for the corresponding quarter of 2013.
Most of the improvement was from Discount Investment Corporation (TASE:DISI), whose profit contribution rose to NIS 320 million (about $91.5 million) for the first quarter from NIS 202 million (about $58 million) for the corresponding quarter.
IDB Development owns 74% of Discount Investment, which has controlling stakes in Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Property and Building Ltd. (TASE: PTBL), and Cellcom Israel Ltd.(NYSE:CEL; TASE:CEL), and a minority stake in Adama Agricultural Solutions Ltd.
IDB Development is the operating arm of IDB Holding Corp. Ltd.(TASE:IDBH), controlled by Eduardo Elsztain and Moti Ben-Moshe. The company has serious cash flow problems, and is due to make a NIS 450 million bond payment in June. The payment will be made from Elsztain and Ben-Moshe’s capital injection for the company’s debt settlement.
Published by Globes [online], Israel business news – www.globes-online.com