El Al rejects nationalization with counter-proposal

El Al dreamliner / Photo: Yochai Mussi

The airline proposes a scaled down public offering, and wants the government to buy a bond and guarantee loans.

El Al Israel Airlines Ltd. (TASE: ELAL) has sent a letter to the Ministry of Finance declaring that it has found a financial institution willing to extend it a $400 million loan. This would avoid the Ministry of Finance proposed public offering in which the government would guarantee to buy any shares left unsold to the public. This plan would likely lead to the nationalization of the airline.

However, El Al is still proposing a smaller public offering of $40 million and the sale of $110 million in convertible debentures to the government.

The Ministry of Finance had proposed that El Al take a $250 million loan with a 75% state guarantee and a $150 million public offering with the state guaranteeing purchase of the shares. If El Al were nationalized, then the Ministry of Finance proposed appointing a trustee to manage the airline.

In its letter to the Ministry of Finance, El Al cites problems with the government plan. These include diluting the stake of the Moses-Borovitz family who control the airline and the months that it would take to arrange the offering, when El Al needs capital immediately. El Al also insists that managing a company through a trustee would involve a high degree of uncertainty. El Al says it is asking for assistance similar to that received by Lufthansa from the German government (purchase of a bond that can be converted and sold as shares to the public in the future).

The Ministry of Finance dismissed El Al's proposal has a ploy to keep the airline in the hands of the controlling shareholders and put the state on the bakc foot. 

Published by Globes, Israel business news - en.globes.co.il - on June 18, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

El Al dreamliner / Photo: Yochai Mussi
El Al dreamliner / Photo: Yochai Mussi
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