Israel’s IDB Holding Corp. (IDBH) disclosed new terms of a $75 million investment by Argentine businessman Eduardo Elsztain before a Tel Aviv court decision today as Chairman Nochi Dankner fights for control of the debt-strapped company.
Tel Aviv-based IDB, which is struggling to meet payments on about 2.06 billion shekels ($571 million), said Elsztain agreed to deposit $75 million in an escrow account which will be released and paid gradually to the company upon court approval, according to a filing to the Tel Aviv bourse yesterday. The two sides committed to “significantly” strengthen the capital structure of unit IDB Development Corp. and raise money, partly by selling at least half of the unit’s stake in Clal Insurance Enterprises Holdings Ltd. (CLIS)
The terms of the investment and fundraising commitment are part of a proposal to counter bondholder efforts to take over the company Dankner spent 15 years building. He turned a family business that made its fortune in table salt and real estate into a holding company which includes Israel’s biggest supermarket chain, Shufersal Ltd. (SAE), and largest mobile operator, Cellcom Israel Ltd. (CEL)
IDB Holding offered to inject 540 million shekels in cash, according to a statement on June 1. The company would also issue 700 million shekels in bonds and debtholders would get a 10 percent stake in the company and another 10 percent in IDB Development as part of Dankner’s proposal. The offer came after bondholders of both IDB Development, including York Capital Management LP, and IDB Holding joined hands last month to force a debt-to-equity swap increasing the possibility that Dankner may lose control of the companies.
The combination of unprofitable investments and regulations to boost competition prompted IDB Holding to include a going-concern warning in its first-quarter earnings report on June 1. It also said that Bank Leumi Le-Israel Ltd. (LUMI) is calling for immediate repayment of a loan to parent company Ganden Holdings Ltd.
IDB shares surged 11% to 8.85 shekels, set for the highest close since May 6 in more than triple the three-month average daily volume at 11:40 a.m. in Tel Aviv.
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