Maalot slashes IDB rating by 2 points
Rating pertains to IDB Holdings, IDB Development, Discount Investments, Clal Industries and Koor. Another downgrade expected to oust corporation from Tel Bond Index
The rating applies to IDB Holdings, IDB Development, Discount Investments, Clal Industries and Koor. Another downgrade will oust the group from the Tel Bond Index that lists the companies with the highest market capitalization in Israel.
Maalot explained the decision by noting that "at the end of the second quarter of 2011, the company's level of leveraging was 70%, and in the wake of recent declines on global stock markets it further fell to 82% in mid September, despite the fact that the company sold off holdings worth NIS 3 billion ($810 million) in the past two months and the reduction of the group's financial obligations by NIS 2 billion ($540 million).
"In the mid-term, we expect the group's management to chart a clear rout to the reduction of its debt and to lowering the group's leveraging back to a 65% level.
"Nonetheless", Maalot noted, "we believe that the group will sell off additional holdings and endeavor to simplify the group's complex structure."
The rating company addressed the recommendations of the Trajtenberg Committee published last week, noting that "the spirit of the committee's recommendations, even if not fully implemented, will probably lead to a decline of the feasibility of pyramid corporate structures and to the simplification of group's control structure."
Selling Makhteshim
In perfect timing with the downgrade of IDB's rating, the group announced on Monday that the sale of the controlling interest of Makhteshim Agan to China National Chemical Corporation (ChemChina) would be finalized on October 17.
The company said that the deal could be completed only after Makhteshim had received the EU Antitrust Authority's permission for the merger. Once the permit was granted, all the regulatory permits for the merger were received, with the exception of the merger certificate from the Companies Registrar.
Recently, the company announced that due to the timetable of the of the EU's Antitrust Authority's authorization process, the parties to the deal agreed to extend the deadline to October 31.
According to information received on Monday, Makhteshim will probably be able to complete the deal before the said deadline.
Once the deal is signed, Makhteshim is expected to be delisted from TASE trading. Koor is expected to receive $1.1 billion for the deal.
According to the agreement's terms, Koor will receive a $960 million non-recourse loan from a Chinese bank for a seven year period. If Koor defaults on the loan at the end of that period, the Chinese bank will be entitled to the remainder of Makhteshim's shares held by Koor.
The price per share for the merger will be $5.57 or NIS 20.88 according to the dollar's rate Sunday. Shareholders will be paid in dollars and will pay the conversion fee.
Click here to read this report in Hebrew
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