El Al Israel Airlines Ltd. (TASE: ELAL) has sent the Ministry of Finance a draft prospectus due to be published today. The Ministry of Finance has asked El Al to change the draft. Besides comments to the effect that El Al will not be able to carry out a private placement, the Ministry of Finance makes clear that the state does not intend to make a loan to El Al out of the state budget.
The equity offering scheduled for this week is part of the aid plan for El Al. The first stage is for the company to raise capital through a $150 million share offering, which the state will take up if the public does not. In the second stage, El Al will take a bank loan of $250 million or raise debt in some other way, with the state guaranteeing 75% of the amount. The total amount of aid is $400 million, which is probably not enough for El Al to recover after the most severe crisis in its history. In the past few months, the airline has been grounded, apart from diplomatic flights, one of them to the UAE, and the other will be to Washington carrying the delegation for the signing of the normalization agreement with the UAE this week.
On October 1, El Al will be obliged by law to return cash to customers who bought tickets for flights that were cancelled. The amount involved is about NIS 1 billion.
El Al wanted to carry out a private placement of shares in order to attract an investor. It presumably had two options. One was under the proposal from David Sapir whereby Sapir sought to acquire a stake equal to that of El Al parent company Knafaim for $51 million. Sapir's proposal included subsequently raising debt via Deutsche Bank of $400 million. The other proposal was from Meir Gurvitz. Details of this proposal have not been published, but Gurvitz too seeks joint control of El Al with Knafaim.
El Al's third suitor is Eli Rozenberg, who has received a control permit from the Government Companies Authority. Rozenberg plans to buy shares in the offering to the tune of $110 million in order to acquire control.
The Ministry of Finance opposes a private placement, and intends to make its objection part of the proposed decision to be submitted to the government to be voted on. The proposal asks for approval for the Ministry of Finance gradually to buy shares not taken up by the public. Initially, the state will buy shares to the tune of $75 million. The shares bought by the state will be held for two years.
In a letter sent to the El Al board of directors on Friday, Ministry of Finance director general Keren Terner-Eyal stated that anyone ordering shares in El Al's offering could make three applications for the units ordered at any price in each application, and that there will be no further restrictions other than those imposed by Israel Securities Authority regulations. The Ministry of Finance expects the offering to take place this week, having set September 15 as the target date.
Published by Globes, Israel business news - en.globes.co.il - on September 13, 2020
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