Israeli tycoon's personal debts amount to 900 million shekels • Ouster from IDB may mean Dankner will have no choice but to default on loans, file for bankruptcy • Bank Leumi, Dankner's main creditor, says it will not offer him any special treatment.
Hezi Sternlicht and Zeev Klein
Time to pay? Israeli tycoon Nochi Dankner
Photo credit: Moshe Shai and Meir Partush
Argentine businessman Eduardo Elsztain
Photo credit: Getty Images
Israeli businessman Moti Ben Moshe
Photo credit: Moti Kimchi
Judge Eitan Orenstein
Photo credit: Moti Kimchi
Israeli tycoon Nochi Dankner might be heading for bankruptcy, market insiders hedged Tuesday, following the Tel Aviv District Court's decision to remove him as chairman of the IDB Group.
The ruling, which Dankner said he intends to appeal, was in line with a recent creditors' vote, secured with a 75 percent majority, to accept the bailout proposal presented by Argentine Jewish businessman Eduardo Elsztain and Israeli businessman Moti Ben Moshe, who now control the IDB Group -- one of the biggest conglomerates in Israel.
The legal defeat was an ironic twist of fate, as it was Dankner who last year sought Elsztain's help to keep the company afloat.
Dankner's ouster from IDB further suggests a bleak future for the tycoon's finances, as without the company's assets it is unlikely that he will be able to pay back his personal debts, which are believed to amount to some 900 million shekels ($260 million).
Ganden Holdings, the parent company through which Danker and his partners own 47% of IDB Holdings, currently owes banks in Israel NIS 500 million ($140 million), with Bank Leumi being the debt's main creditor. Ganden Holdings' own parent company, Tomahawk Investments -- Nochi Dankner’s private investment company -- also carries debts amounting to millions of shekels.
Earlier in 2013, Dankner attempted to restructure these debts in a deal that would have seen Bank Leumi forgive the lion's share of the loans, but to no avail. As one of IDB's creditors, the bank's decision to reject the deal ultimately spelled Dankner's downfall.
Bank Leumi Chairman David Brodet said Tuesday that the bank has no plans to offer Dankner special treatment: "We will treat Nochi Dankner the same way we treat any other debtor. We do not discriminate between a debtor from Rishon Lezion and a debtor who happens to be a rich or prominent figure."
Despite the series of debt restructuring offers presented as part of the attempts to negotiate a solution for IDB, the extent of Dankner's personal debts has yet to be fully disclosed. In an interview given last week, Dankner refused to discuss his personal finances, but his father, Yitzhak Dankner, remarked that he had "no idea" how his son plans to get out from under his debts.
"It is important for me that the public knows that I'm the real injured party here, because I never lost faith in IDB and I invested everything I have in its shares," Dankner told close associates on Sunday.
Tuesday's ruling made no mention of the tycoon's personal debts or the extent of his assets, as the proceeding pertained to public companies and Dankner's settlement proposal included additional partners. The court appointed observers, attorney Hagai Ullman and financial expert Eyal Gabai, were not required to address the issue during Tuesday's hearing.
Other banks serving as Dankner's creditors have yet to comment on the ruling or offer any insight as to their plans should he default on his loans.
Sources in the banking system said that Dankner has only a few assets left to realize in order to pay his creditors. In all likelihood the banks would have to forgive some of Dankner's debts, while he would have to realize most, if not all, of his available assets.
"Had the court decided to leave Dankner at the helm of IDB the finance committee would have filed a High Court of Justice appeal on the matter," Knesset Finance Committee Chairman MK Nissan Slomiansky (Habayit Hayehudi) said Tuesday.
He explained that, "Such a decision would have gone against the spirit of the Centralization Law, according to which all pyramid groups must become two-tier companies within 4-6 years. Dankner's offer would have increased the IDB pyramid to 8-9 tiers."
Labor MK Shelly Yachimovich said, "One can only hope that this wild leveraging, the roller coaster of gambling with the public's money has finally stopped. Unfortunately this doesn’t mean that the savers' money is guaranteed. The regulators still have to learn their lessons, to make sure that this kind of insatiable greed doesn’t happen again."
Meretz Chairwoman MK Zehava Gal-On said that "it would have been better had the court, instead of taking the IDB pyramid out of the hands of one leveraged tycoon and placing it in the hands of other leveraged tycoons, ordered the dissolution of this pyramid. It should have sent a clear message to the tycoon families in Israel that the era of pyramids is over."