Midroog Ltd. says that the Plaza hotel and casino project in Las Vegas planned by Nochi Dankner and Yitzhak Tshuva creates high business risk for IDB Holding Corp. Ltd. (TASE:IDBH).
Dankner and Tshuva own the project in equal shares: Dankner through IDB unit IDB Group USA Investments Inc. held equally by Discount Investment Corporation (TASE: DISI) and its subsidiary Property and Building Ltd. (TASE: PTBL), and Tshuva through Elad Properties LLC unit Elad Las Vegas LLC.
Midroog attributes the project's risk to its size, exposure to the real estate market in Las Vegas, which is falling, and exposure to liquidity risk related to financial institutions' willingness to extend credit in view of the credit crisis in the US.
Midroog also noted the increase in IDB Group's leverage after it raised debt, distributed dividends, and the fall in company value of its subsidiaries. Midroog adds that IDB's debt is causing heavy losses to the company because of the linkage to the Consumer Price Index (CPI) and shekel-dollar exchange rate differentials.
IDB Group USA and Elad Las Vegas bought the old New Frontier Casino on the Las Vegas Strip for $1.24 billion, demolished it, and plan to invest an additional $5-7 billion in building the Plaza hotel, casino, convention center, residential, and shopping complex. Construction is expected to take 4-5 years after building permits are obtained. The companies have yet signed a financing agreement for the project either.
As for IDB's investment in Credit Suisse Group (NYSE: CS; SWX: CSGN; XETRA: CSGZ) through Discount Investment subsidiary Koor Industries Ltd. (TASE:KOR), Midroog calls this "a speculative investment."
Published by Globes [online], Israel business news - www.globes-online.com - on July 30, 2008
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