El Al Israel Airlines Ltd. (TASE: ELAL) is still struggling to raise a loan but has been given a short-term lifeline of $25 million - a $10 million owner's loan (without interest) and a $15 million advance from the Ministry of Finance for providing security for Israeli carriers. The $25 million will improve El Al's immediate cash flow situation and enable it to repay some of its debts, including to customers whose flights have been cancelled.
El Al will also receive an additional $8 million for securing flights for Israeli airlines in December, with a major increase in flights because of the opening of the Tel Aviv - Dubai route.
But El Al has still been unable to obtain banks loans as part of the government's recovery plan, which began in September when the airline raised NIS 505 million in a public offering on the TASE. The offering led to a change in ownership with Eli Rozenberg becoming the controlling shareholder with a 45% stake. The state also took part in the offering, buying shares for NIS 116 million and a 14.5% stake.
In El Al's third quarter financial report, which was published last month and had a 'going concern' qualification attached, the company also noted that it had not yet been able to obtain the bank loan of $400 million that it had been seeking and that it was exploring different options such as raising a bond. El Al has also asked the Ministry of Finance to increase the government guarantee for any loan or bond from 75% to 82.5% but so far no response has been forthcoming.
The Ministry of Finance has told "Globes" that the matter is being discussed. Market sources believe that if El Al can find a bank to extend the loan, then the Ministry of Finance will raise the guarantee, but not if bonds are issued.
El Al also said in its financial report that it had not yet succeeded in paying back passengers for cancelled flights as required by law.
El Al receives 97.5% of expenses for flight security for Israeli airlines (including Israir and Arkia). The agreement on this matter was recently extended to July 31, 2021, with an option to extend to December 31, 2021.
In 2020 El Al has been paid about NIS 400 million for flight security, down from NIS 946 million in 2019 - the fall reflecting the sharp reduction in the number of flights due to the Covid-19 pandemic.
Published by Globes, Israel business news - en.globes.co.il - on December 3, 2020
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