Israel’s government has approved the decision to provide assistance to flag-carrier El Al, adding that its share acquisition will be conducted in a manner such that the state does not exceed a 44.9% stake in the airline.
El Al is planning to issue 753.3 million shares to raise urgent funding amounting to 505 million shekels ($145 million).
The government has sent a formal communication to El Al approving the measure and detailing the conditions for its participation. Tel Aviv’s stock exchange director has also approved the listing.
El Al will receive notice from the government, shortly after receiving the results of the offering, relating to the manner in which securities will be allocated to the state to account for any difference between the target and the amount raised.
The government says the state will sell its shareholding within 18 months of the public offering.
It reiterates that it is waiving “in an irrevocable manner” the right to exercise control through any shareholding, and that the government will establish a committee for the purpose of selling them.
The share issue will be complemented by a state-backed $250 million debt.
While the government says it “prefers” this debt be raised through a bank loan, it adds that – if no agreement can be reached with banks – it will allow El Al to raise debt in an “alternative manner”, including bonds.
Any state guarantee is conditional on several elements, including implementation of the carrier’s efficiency plan, a prohibition on distribution of dividends and other specific transactions until the loan is repaid, and reductions of salaries and benefits – including allocation of free and discounted flights – for the management board.
El Al is set to launch the share offering just as the government is re-imposing national restrictions on its citizens and businesses.
The tight restrictions will last from 18 September to 11 October, a period which will controversially cover important holidays including Rosh Hashanah and Yom Kippur.
El Al had already prolonged its passenger flight suspension, effective since March, to the end of September.
The Israeli ministry of health says it is working with the ministries of transport, interior, and foreign affairs, as well as national security representatives to draw up recommendations for aviation.
But it states that, over the next three weeks, the lockdown will involve a “full closure” of all private businesses which deal with an “audience”, including those in leisure, domestic tourism and recreation.
Public businesses that provide vital services will be exempt. Education institutions will be shut, gatherings limited, and travel restrictions will be imposed on citizens’ leaving their homes.
Prime minister Benjamin Netanyahu outlined the decision before departing to meet representatives of the United Arab Emirates and Bahrain, following the Gulf states’ moves to normalise diplomatic relations with Israel.
“We were among the first in the world to understand the magnitude of the danger [from coronavirus],” he said. “We closed the sky and also introduced a closure within the country.”
He says Israel was, as a result, one of the first countries to re-open its economy. But he adds that the lockdown situation is “like an accordion”, opening when the health situation improves, closing when the risk increases.
Netanyahu says the need to “close the accordion” follows the advice of medical specialists who raised a “red flag” on 10 September, after a period of minimal restrictions.
He argues that the holiday season offers an opportunity to impose the lockdown because the economy “shifts to a low gear anyway”.
“These steps come at a difficult price for all of us,” he says. “This is not the holiday we are used to.”
