Company Israir Aviation and Tourism is complementing the moves that will make it a public company through its parent company, BGI Investments, which will also change its name to Israir. This past weekend, BGI completed the acquisition of full ownership of Israir, and today (Sunday) reported an important update on the terms of a $ 40 million bank loan taken out by Israir in 2018 to finance its aircraft fleet.
Globes learned last week that BGI intends to raise NIS 80 million from the public by issuing shares, at a company value of NIS 350-400 million (after the money), probably in the coming months. In addition, BGI will convene a special general meeting of its shareholders at the beginning of February, in order to vote on a proposed resolution to change the company’s name, to a new name that will include the word Israir.
BGI, controlled by Shai Odem’s company Rami Levi And Shalom Haim, last week exercised the CALL (purchase) options available to it and acquired 49% from the hands of the IDB trustee and Rami Levy, in exchange for the allotment of its shares at the same rate. Following the move, BGI now holds 100% of Israir’s shares, while BGI’s holding is divided between Shai Odem’s company Levy and Haim (43%), Rami Levy (24%), Ne’eman A. DB (25%) and the public.
Increases public holdings
As stated, today BGI reported that Israir has agreed on a move to refinance the aircraft fleet it owns, in which the financing bank, Bank Leumi, agreed that Israir will repay the aircraft loan and repurchase it on new terms. Israir’s fleet includes four aircraft – two Airbus and two ATR.
Under these terms, a sum of $ 14.5 million from the loan, which was supposed to be repaid in one installment in April 2023, will be spread over four years starting from April 2023, so that by April 2027 the loan will be repaid in full. It was further agreed with the Bank that Israir will return the benchmark for the ratio of financial debt to EBITDA (cash flow operating profit) starting at the end of 2023, so that its debt coverage ratio will not exceed 5.
Earlier, BGI raised NIS 36 million in rights issues, of which NIS 31 million was channeled.Shekel is owned by Shai Odem. Now, as stated, BGI is set to raise additional capital from the public, in order to increase the public’s holdings in the company and enable the re-listing of its shares on the Tel Aviv Stock Exchange.
Recall that in May 2021, Israir received a down payment of $ 16 million from the state for flying the security system for a period of 20 years, as part of the state’s overall arrangement with the three Israeli airlines. The arrangement is intended to compensate airlines for government decisions to close the sky in an attempt to curb the spread of the corona plague. Under the same agreement, BGI also undertook to inject $ 8 million into Israir.
Hope to remove aviation restrictions
These days, the aviation industry is once again on the verge of paralysis, following the restrictions on entry and exit to Israel imposed by the government at the end of last November. These restrictions include a ban on flying to many countries defined as red, including countries that are extremely popular for Israir such as the United Arab Emirates, to which it operates on peak days 4-5 flights a day.
It was also decided on sweeping isolation for all those entering Israel, including the vaccinated, and these guidelines led to many cancellations of planned trips and halted future bookings, which weakened local airlines’ cash flow, overshadowing uncertainty over restrictions and classifying other countries as red. .
With the spread of morbidity in Israel, and the understanding that aviation restrictions no longer help the purpose for which they were set, industry insiders hope that this week they will be eliminated, or that relief will be achieved by removing the isolation obligation for the vaccinated and significantly reducing the red list. At this time the restrictions are valid until January 5, 2022.
Flight routine also under corona conditions
From the beginning of 2021 to the end of November, Israir flew 310,000 passengers (round trip) and it occupied a volume of about 6% of all passenger traffic at Ben Gurion Airport. Compared to the corresponding period in 2020, this is a growth of 84% in passenger traffic.
Unlike the other companies, Israir Managed to maintain a continuous flight routine (relative to restrictions), and during the crisis during the Corona the flight was almost not deleted from the flight schedule at Ben Gurion Airport. With the opening of destinations according to the frequently changing restrictions.
In the third quarter of 2021, Israir recorded revenues of $ 40 million, reflecting a sharp increase compared to revenues of $ 20 million in the corresponding quarter in 2020, but also a sharp decrease compared to revenues of NIS 80 million recorded in the third quarter of 2019 (before the eruption).
In addition to the company’s dealing with the damage of the corona crisis, its financial results were affected by three other events. The initial cessation of sick leave in June 2021 for aviation and tourism workers, resulted in the company absorbing more workers during that month, while passenger traffic remained limited due to the fourth wave of morbidity.
Earlier, Operation The Wall Guard in Gaza in mid-May, hit the volume of future orders for the summer season and affected occupancy rates. The Prime Minister’s call at the end of June not to fly abroad or book future flights also halted customer bookings, and severely hampered the operational and marketing preparations for the summer season.
Despite these difficult starting points, Israir ended the third quarter with a gross profit of $ 2.3 million. The EBITDA contribution was close to zero, while the net loss amounted to $ 9 million, partly due to the effect of non-recurring provisions on reorganization expenses.
In November and most of December, the company returned to full activity, which has since been halted following the eruption of the Omicron wave. The working assumption is that within two months, Israir will return to full activity, and thus it will be possible to complete the capital raising led by BGI even before Pesach.
Israir waived a debt of $ 5 million
Israir passed into control of BGI in January 2021, following a tender conducted by an IDB trustee, which controlled Israir before the decision to liquidate it. As part of the same transaction, BGI and Rami Levy purchased 75% of Israir’s shares for NIS 121.5 million, and at a company value of NIS 162 million.
In addition, Israir waived a debt of about $ 5 million, so that in practice the transaction reflected a consideration of NIS 179 million. As part of the transaction, BGI acquired 51% of Israir’s shares for NIS 82.62 million, while Rami Levy personally purchased (and not through its retail chain) another 24% of Israir’s shares, for NIS 38.88 million.
As part of the transaction, BGI received CALL (purchase) options, which were exercised last week, for the purchase of the shares held by Rami Levy (24%) and the remaining shares held by the IDB trustee (25%) in exchange for the allotment of BJ shares. YI at the same rate. In addition, the IDB trustee received a PUT option (sold) to sell to BJI the remaining shares in its possession for NIS 40.5 million, until January 2023.