Ministry of Finance director general Keren Terner-Eyal has set a date for a public equity offering by El Al Israel Airlines Ltd. (TASE: ELAL), and has presented to the company's management a new plan for carrying it out, "Globes" has learned.
Last week, El Al chairman Yehuda Levy and CEO Gonen Usishkin wrote to Minister of Finance Israel Katz requesting his intervention in the aid plan for the company. Among other things, they stated in the their letter that El Al had received no state support, "neither a grant, nor a guarantee, nor a bridging loan." They also stated that El Al had met all the conditions set by the Ministry of Finance, including a decision on a share offering by the board of directors, publication of a prospectus, no dividend distributions, salary reductions for company officers, recovery agreements with workers' unions, and so on.
Despite this, El Al claims, "the Ministry of Finance has reneged on its declared intention of buying shares in the offering." The letter raises a list of further claims about the Ministry of Finance's conduct. Among other things, it states, "We regretfully point out that so far Ministry of Finance officials have failed to promote (not to say obstructed) every solution that the company tried to put forward in connection with a bank loan, and raised many difficulties every time the company brought to the table a bank that had examined the company's business plans closely and sought to make progress on a loan to the company backed by a state guarantee."
The company hurls further accusations at the Ministry of Finance. "The insistence (which we find inexplicable and incomprehensible) of the Ministry of Finance on preventing as successful as possible an offering, for the benefit of the company, its shareholders, and the Israeli public, makes no sense and has no relevant justification." Ultimately, the letter asks Katz to intervene to expedite the state's aid plan.
In response, the Ministry of Finance director presented a new plan, which "Globes" has seen and of which the following are the main points:
1. By September 10, El Al will publish an offering of shares. The offering will consist of 753,353,204 shares for a total of not less than NIS 505.5 million. The minimum price in the offering will be NIS 0.671. The offering will take place on September 15.
2. In the framework of the offering, the state will initially bid to buy 393,372,908 shares at the minimum price, on the assumption that the public will not buy them.
3. The state will undertake to sell or transfer the shares allocated to it within 24 months from the date of the allocation, and the company will not be able to determine the identity of the buyers.
4. The state will then provide a guarantee for a loan that the company will take form a financing entity, amounting to $250 million. The Ministry of Finance stresses that the state will provide the guarantee only after the other parts of the plan have been carried out in full.
An important detail is that Terner-Eyal's letter stipulates that the state will not allow any change to the plan. In addition, she does not rule out providing a state guarantee to a recognized foreign bank (such as for example Deutsche Bank, the lending bank in the bid by David Sapir) under the revised plan, which calls for a $250 million loan rather than $400 million as originally envisaged.
It should be pointed out that the whole plan is subject to approval by the government, which is due to discuss it early this week.
Published by Globes, Israel business news - en.globes.co.il - on September 6, 2020
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