Chairman Nochi Dankner has promised to do everything in his power to save IDB
Holding Corp. after the conglomerate attached a “going concern” warning from
auditors to its second quarter financial report.
A warning of this type
indicates that there are doubts as to a company’s continued solvency.
IDB
recorded a net loss of NIS 1.27 billion in the second quarter, compared with a
loss of NIS 883 million in the corresponding period last year, the company
reported Friday.
Accountants BDO Ziv Haft and KPMG Somekh Chaikin
expressed doubt over the company’s ability to repay all its debts, indicating
that it may be facing bankruptcy.
S&P Maalot immediately downgraded
its rating for IDB bonds to CCC from BBB-, citing a continuing decline in the
level of liquidity and a rising fear of insolvency within a year.
Shares
in the company plunged as much as 10 percent in early-morning trading but
recovered to finish at NIS 14.01, a decrease of 2.1%.
In light of the
report, Dankner decided to give up half his monthly salary for one year from
September 2012. Senior IDB development staff will see their salaries decrease by
10- 15% in the same period.
“We are going through difficult times. This
is not easy for any of us, but I believe and am confident we will emerge from
this crisis stronger and looking forward,” Dankner wrote in a letter to staff on
Friday. “IDB Holding has sufficient cash reserves to meet its debt payments for
close to a year. The challenge we face is to substantially increase
liquidity.”
Promising to do “whatever is necessary” to protect the money
of investors and the rights of bondholders and shareholders, Dankner said IDB
would act to inject capital, sell assets and continue to streamline and cut
expenditure. He went on to list several measures his company had taken in the
past year to fill its cash reserves, including the sale of Makhteshim Agan to
ChemChina.
After expressing confidence that new investment partners would
be found soon, Dankner concluded with a personal message to everyone currently
involved with IDB.
“All of us – employees, managers, various
stakeholders, bondholders, and shareholders – have a shared purpose: to create a
work environment of goodwill in which the company will continue to operate
strongly to get through the present crisis. In the past, we have known how to
deal with crises through determination, devotion, and sacrifice. We will do the
same this time.”
IDB Holding Corp. appointed Avital Bar-Dayan as vice
president of investor relations on Sunday. Bar- Dayan, who leaves her position
as VP of the Midroog rating agency, said she intended to play a role in measures
taken by the company, “with an emphasis on strengthening relations within the
capital and debt markets.”
Finance Minister Yuval Steinitz downplayed
concerns over IDB and a subsidiary, Clal Insurance, during the weekly cabinet
meeting, explaining that the Treasury’s Capital Markets Division had been
following developments for the past few months.
“The possibility of
damage to pensions is less than one in a thousand, and therefore we do not see –
even in the worst case scenario – fundamental damage being done to the pension
savings of Israeli citizens,” Steinitz said.
According to the Capital
Markets Division, Clal Insurance is “a leading, profitable and stable company
with strong management” that easily meets the Treasury’s requirement of
maintaining high capital reserves.
Labor Party chairwoman Shelly
Yacimovich slammed Steinitz over his comments, accusing him of a complete lack
of understanding of the capital market and of characteristic disregard for the
“miniscule income of working people.”
However, she commended Dankner for
differentiating himself from other powerful businessmen, pointing out that he is
attempting to sell assets and attract investors rather than requesting a haircut
from bondholders.