Moti Ben-Moshe has been ousted as chairman of IDB Development Corporation Ltd. (TASE:IDBD), after Eduardo Elsztain made further cash injections into the company conditional on him being recognized as sole controlling shareholder.
IDB Development announced today that, in response to an ultimatum by its bondholders, Elsztain had agreed to bring forward from July to the current month the injection of NIS 150 million into the company that he had previously promised (through an exercise of options), as demanded by the trustee for the bondholders. Elsztain also announced that he was willing to inject an additional NIS 100 million into IDB in the coming months through a share offering.
On the way to a debt arrangement?
Elsztain’s offer was contingent on being recognized as the sole controlling shareholder in IDB Development and his appointment as sole chairman, thereby ending Ben-Moshe’s term as co-chairman. He also asked the board of directors to establish a committee composed of board members to conduct talks with the bondholders. The trustee’s demand for earlier payment by Elsztain was made recently, following concern that the company would run out of money soon, leading to a situation in which IDF Development would require an additional debt arrangement.
The bond trustee, Hermetic Trust (1975), yesterday sent a letter to the IDB board demanding an immediate undertaking by Elsztain to bring forward his cash injection; otherwise, the bondholders will convene to consider further measures. The letter stated, “Beyond the problems stemming from the company’s challenging financial state, to say the least, the disputes between the controlling shareholders, and between them and the board of directors, are worrying, and are creating deep concern about the company’s ability to meet its obligations to its bondholders fully and on time.”
The figures cited in the trustee’s letter indicate that IDB Development had NIS 550 million in cash and financial obligations totaling NIS 770 million to pay by the end of the year, NIS 430 million of which is due for payment at the beginning of July. IDB Development has three bond series totaling NIS 3 billion trading at yields ranging from 14% to 30%.
Losses of over NIS 1 billion
Elsztain and Ben-Moshe acquired control of IDB Development last year as part of a debt arrangement at a cost of NIS 1.8 billion to date. As demanded by Elsztain, the company held a rights issue amounting to NIS 806 million in early 2015, but only a little over half this amount was actually raised, after Ben-Moshe elected not to take part in it. A week later, Ben Moshe demanded that Elsztain sell his share in the controlling interest to him, alleging violations of the agreement between them. Elsztain was unwilling, and the two men entered an arbitration proceeding conducted by Dr. Amiram Benyamini, who began his work a week ago.
Following the rights issue, Elsztains’ stake ballooned to 61.5% of IDB Development’s share capital, while Ben-Moshe’s stake was diluted to only 16.2%. The two men’s aggregate holdings have a current market value of only NIS 600 million, giving them a NIS 1.2 billion loss on paper.