IDB Chairman Nochi Dankner has two months to sell half of IDB Development's stake in Clal Insurance, the Tel Aviv District Court ruled Sunday. If he fails, a creditors meeting will be held to approve a takeover of the debt-strapped company.
Judge Eitan Orenstin said at the start of the court session that he was under the impression that the parties were afraid to engage in a dialogue "for fear that it would be interpreted as an admission by the company that it is in trouble."
He said the NIS 800 million (about $221 million) the company owes creditors should be deposited in a trust until the end of August by observer Hagai Olman, an attorney who would also be appointed an outside observer for IDB Holding.
According to Judge Orenstin, "Over the weekend promissory notes were submitted on behalf of Dankner and (Argentinean businessman Eduardo) Elsztain. These promissory notes are not enough to change the picture. They are not an outline the court can weigh properly.
"The court calls on the parties once again to reach a wide agreement. The parties are expected to demonstrate maturity and responsibility while bearing in mind the fate of public funds. They must work for an agreement, ignoring past differences.
"IDB Development's solvency must be set not just in asset value but also in its inability to meet its commitments until mid 2014. If an infusion is not guaranteed through sale of assets, IDB will fail to meet its commitments.
"IDF must sell half of its stake in Clal Insurance. I have decided to allow IDF to utilize its efforts to sell assets, headed by Clal Insurance, to the fullest. I give you till August 22 to complete the sale, meaning two months," the judge said.
Last week, Dankner made a new debt restructuring offer in an attempt to appease bondholders seeking to oust him.
IDB said that under the latest debt restructuring proposal, Dankner and Argentinean businessman Eduardo Elsztain and other controlling shareholders would inject NIS 375 million (about $102 million) into the company immediately, which would go towards paying bondholders, and the company will pay bondholders another NIS 165 million ($45 million) from cash on hand plus another NIS 100 million ($27 million) in the next four years.
In addition IDB said if a deal is reached with bondholders, Elsztain would invest another $75 million, or NIS 280 million, in IDB Holding.
Under the plan, bondholders would still take a reduction in debt but receive 10% stakes in IDB Holding and its IDB Development unit and they would be issued a new bond series of NIS 700 million ($190 million).
The IDB group, which has assets of $30 billion, controls Cellcom, Israel's leading mobile phone operator, supermarket chain Shufersal and Clal Insurance and its subsidiary Koor Industries owns a 2.4% stake in Credit Suisse.
Many of the companies IDB owns have been hard hit by a combination of slowing economic growth and increased competition.