El Al to receive further $30m state aid

El Al plane  / Photo: Yoav Yaari

El Al controlling shareholder Kenny Rozenberg will be required to invest a matching sum.

The Israeli airlines will receive additional financial aid from the Ministry of Finance amounting to $41 million. The proposal is due to be approved by the government today. El Al (TASE: ELAL) will receive $30 million on a matching basis, meaning that controlling shareholder Kenny Rozenberg will have to invest the same amount.

The decision will bring to a conclusion the negotiations between the Ministry of Finance and the airlines, headed by El Al, over aid in the light of the continuing effects of the Covid-19 pandemic on the aviation and tourism industries.

El Al at first sought $100 million, which the Ministry of Finance described as "a questionable demand". The Ministry of Finance agreed to aid of up to $50 million on a matching basis. As mentioned, the sum eventually settled on was $30 million.

The aid will be provided through the issue of three-year convertible bonds. At the end of that period, El Al will have to decide whether to repay the debt to the state interest free, or to convert it into equity held by the state, at a price representing a 7.5% discount on the market price of the shares.

In the event of the latter, the state will sell the shares within eighteen months. The Ministry of Finance will allocate NIS 25 million to the aid program in 2021 and NIS 115 million in 2022. The budget source for the aid will be the allocation for dealing with the Covid-19 pandemic.

The equity conversion track is currently relevant only to El Al, as it is the only one of the Israeli airlines that is publicly traded. The two smaller airlines, Israir and Arkia, will receive the aid in the form of state-guaranteed loans.

In May, El Al received another form of aid from the Ministry of Finance, through the purchase of flight tickets for security staff for twenty years ahead. In exchange for the $210 million advance, El Al was required to make an equity offering of half the amount, in which Rozenberg undertook to buy shares to the tune of $43 million, but he has yet to do so.

Published by Globes, Israel business news - en.globes.co.il - on November 21, 2021.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.

El Al plane  / Photo: Yoav Yaari
El Al plane / Photo: Yoav Yaari
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