Ganden Tourism and Aviation Ltd., ahead of a planned merger with Clal Tourism, has disclosed figures about its holdings, showing that its main subsidiary, Israir, has accumulated losses of $109.3 million since its establishment.
Ganden Tourism and Aviation Ltd. is bringing a dowry of a $79 million shareholders' equity deficit and $70 million in debt to its merger with IDB Holding Corp. Ltd. (TASE:IDBH) unit Clal Tourism Ltd. Nochi Dankner controls both Ganden and IDB, where he is chairman and CEO.
Ganden Tourism's shareholders' equity deficit and debt should drop by about $40 million when an owners' loan is converted into shares ahead of the planned merger.
A 500-plus page document details Ganden Tourism's financial figures, and those of its subsidiaries, including its primary holding, Israir Airlines and Tourism Ltd. The disclosure was necessary for approval of the merger between Ganden Tourism and Clal Tourism. A shareholders meeting is set to approve the merger on October 15.
The document discloses Israir's full financial details, confirming reports that they are not great. Israir's accumulated debt since its founding is $109.3 million. It lost $37.4 million in 2008, more than double its loss of $14.7 million in 2007. A major reason for the losses in 2008 was the operation of a Tel Aviv-New York route, which cost the airline $14.8 million before operations were suspended.
Israir has been able to narrow its losses so far in 2009, losing $500,000 in the first quarter compared with a loss of $15.6 million in the corresponding quarter. The company reduces its losses through cost-cutting measures, including reducing its workforce to 531, 60 fewer than in 2007.
At the end of March, Israir had a working capital deficit of $75.3 million, which it is seeking to eliminate by converting an owners' loan into equity and reaching a debt settlement with the banks. Israir's owners' loan is NIS 185.6 million, of which Dankner put up NIS 86.9 million. If the controlling shareholders covert the debt into shares, the airline's shareholders' equity deficit will fall to $29.1 million. Excluding the owners' loans, the airline's debt is $57 million.
IDB will pay $1.25 million to acquire Ganden Tourism, $500,000 less than in the original agreement. The reduction was made after El Al Israel Airlines Ltd. (TASE: ELAL) obtained permission to make domestic flights between Ben Gurion Airport and Eilat earlier this months, which will increase competition on the route.
Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2009
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