US businessman and El Al Israel Airlines Ltd. (TASE:ELAL) controlling shareholder Kenny Rozenberg is looking to strengthen his hold on the carrier - an investment on which he has already lost 50% of his money.
Rozenberg recently approached El Al's board of directors with the offer of converting the owner's loan, which he has given the company, into equity. Following the offer, the board has set up an independent committee to examine the proposal. According to El Al, no agreements have yet been formed between the parties.
El Al is currently traded on the Tel Aviv Stock Exchange (TASE) with a market cap of NIS 640 million. Rozenberg holds a 39.1% stake worth NIS 250 million. The owners loan to El Al amounts to $70 million (NIS 240 million), which if fully converted at El Al's current market cap would increase Rozenberg's stake to 55.6%.
Rozenberg became El Al's controlling shareholder two years ago after investing NIS 360 million as part of a TASE offering conducted to save the airline from collapsing during the Covid pandemic. Subsequently Rozenberg injected a further NIS 166 million into El Al for additional shares and extended the $70 million owner's loan. To date, Rozenberg has lost hundreds of millions of shekels on the investment.
Converting the loan to shares would strengthen El Al
Conversion of the owner's loans into shares is a stakeholder transaction, and therefore requires approval of the El Al board of directors audit committee, then approval of the entire board, and approval of the company's shareholders' meeting, with the support of a majority of the minority shareholders (shareholders with no personal interest in the decision).
El Al reported last month that it ended the third quarter of 2022 with $626 million revenue and $67 million net profit. However, the company still operates with a $328 million equity deficit, so converting part of the debt into shares would strengthen its financial position and improve its liquidity. For the first time since the start of the Covid pandemic, El Al's auditors have removed the 'going concern' qualification attached to the company's financial results following the airline's much improved performance.
Published by Globes, Israel business news - en.globes.co.il - on December 12, 2022.
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