Nochi Dankner. Relief premature?
Photo: Yariv Katz
Credit Suisse plunges 14%
Floor price 16% lower than Swiss bank's share price, which may cause Koor to lose its Credit Suisse holdings to creditor banks. Drop erases almost entire NIS 3.6 billion profit reported by Koor in last investment round in the bank
Last week, after having completed a two-step selloff of its Credit Suisse shares
and racking up a total of some NIS 1.3 billion ($360 million), owner of the company's controlling interest Nochi Danker breathed a sigh of relief, saying that the crisis was behind Koor.
Ongoing slides of Credit Suisse shares increase the accumulated loss from Koor's investment to NIS 3.21 billion ($900 million), NIS 800 million ($225 million) of which was realized through the company's selloffs from the previous weeks, which means that the company erased nearly its entire NIS 3.6 billion ($1 billion) recorded in 2009.
Now, after a steep 13.7% drop the share sustained last week, Dankner's relief seems premature.
Last Week
Golan Hazani, Calcalist
Initial information from IDB situation-room set up last week to tackle Credit Suisse drops: Shares acquired for NIS 2 billion realized for NIS 1.2 billion, setting NIS 800 million loss
Financing costs and currency hedging further erodes Koor's profit on the investment.
Credit Suisse lost 44% since the beginning of the year on the backdrop of growing concerns over another global recession and the banking system's exposure to European debt.
The threat looming over Koor's investment in the Swiss bank stems from the floor-price set by lending banks City and Morgan Staley for the repayment of Koor's debt to them.
Credited Suisse's share, which dropped on Friday to 20.96 Swiss francs, is once again hovering near the floor price set recently in an agreement between Koor and the lending banks to approximately 18 francs – 16.4% below the current price.
If the price drops to anything below this floor price the banks might demand that Koor realizes the shares it pledged as security for the NIS 4 billion ($1.1 billion) loan, thus realizing an additional and much higher loss from the investment than the one registered so far.
And as if that were not enough, Credit Suisse losses might force Koor to pledge additional securities to lending banks. Furthermore, Koor is exposed to the risk of investment banks and hedge funds selling Credit Suisse shares which will force Koor to sell its remaining shares of the Swiss bank at a particularly low price.
Click here to read this report in Hebrew
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