After prolonged negotiations, agreement has been reached on further state aid to El Al Israel Airlines (TASE: ELAL). The Ministry of Finance will provide tens of millions of dollars for the airline, while its controlling shareholder, Kenny Rozenberg, will inject further capital. So far, Rozenberg has injected NIS 830 million into the company, including the the purchase of control in September 2020.
The plan will provide El Al with an amount between $50 million and $100 million, with the state providing more than Rozenberg. The plan will be finalized in the coming days, and will be subject to approval by the government.
The Ministry of Finance said in a statement, "After intensive negotiations over the past few weeks between the management of El Al and the professional team at the Ministry of Finance and the Ministry of Transport, the sides have reached understandings in principle on an additional aid plan, against the background of the crisis caused by the outbreak of the Omicron coronavirus variant. The plan will include an injection of tens of millions of dollars in the near future from the state and from the controlling shareholder in the company, and it will enable the company to get through the crisis for the next few months.
"At the same time, the state in also in talks with the other Israeli airlines, to which an aid plan will be offered along the same lines on the basis of the principle of equal treatment."
Minister of Finance Avigdor Liberman even offered words of hope for those in the industry. "I hope that in the coming month we will open the skies to incoming and outgoing travelers," Liberman said. "The new aid plan will enable the companies to get through the crisis while preserving the principle that state aid should be in parallel with an external injection of capital into the company to strengthen its capital structure. The best aid that the state can provide to the airlines is to enable them to fly with minimum restrictions."
Taking on more debt
This time too, the state will receive 5-7 year bonds convertible to shares. The loan to El Al will be interest free, and the state will continue to limit its stake in the company to up to 24%, and in any event will not have voting rights. At present, following its participation in the share offering in September 2020, the state owns 13% of El Al.
The state is committed by a government decision to selling the shares it holds in El Al. El Al will receive capital that will improve its cash flow, but it will take on additional debt, albeit interest free. Within 5-7 years, El Al will be required to repay the state the amount it receives, or convert the debt to equity.
Published by Globes, Israel business news - en.globes.co.il - on January 2, 2022.
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