Israel's Ministry of Finance has agreed the details of the state's rescue package for El Al Israel Airlines Ltd. (TASE: ELAL).
The Ministry of Finance will transfer $210 million as an advance to the financially ailing airline for airline security services in the coming years. In addition, El Al has committed to raise another $105 million through a public offering with controlling shareholder Eli Rozenberg committed to buying at least $43 million of the shares. El Al has also agreed to implement its streamlining plan, which will result in savings of $400 million in the coming years.
The Ministry of Finance has agreed to grant El Al the money it needs to survive after negotiations with Bank Leumi (TASE: LUMI) and Israel Discount Bank (TASE: DSCT) for a $300 million loan with an 82.5% state guarantee failed to bear fruit. The Ministry of Finance did not agree to the interest rate terms that the banks insisted on charging El Al.
El Al needs the money to pay suppliers and refund customers, many of whom have yet to receive back money paid for cancelled flights over the past year due to the Covid crisis.
El Al has already conducted two public offerings over the past six months with controlling shareholder Eli Rozenberg investing $110 million in the first offering and $50 million in the second. With a commitment to $40 million in the next offering, Rozenberg would have invested over $200 million in the airline.
As part of its streamlining plan, El Al is laying off 2,000 employees, nearly one third of its total work force. In this way El Al hopes to become a leaner and more efficient company, which will help it recover from the devastating blow of the Covid-19 pandemic, which has brought international travel, to and from Israel, to a virtual halt for much of the past year.
Published by Globes, Israel business news - en.globes.co.il - on March 17, 2021
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