El Al has signed an agreement in principle with the Phoenix Insurance Company for a loan of $ 130 million. As part of the loan, Phoenix will receive an option to purchase 25% of the shares of El Al’s Passenger Club – a subsidiary called El Al Frequent Flyer. This is an agreement in principle that will remain in force for 90 days only.
The loan will be given to El Al’s subsidiary, the frequent flyer club. The final repayment date of the loan will be December 31, 2027, at an annual interest rate of 5.5% to 7%. As part of the loan, Phoenix will receive an option to purchase 25% of the frequent flyer club shares that can be redeemed by the loan repayment date.
As collateral for the loan, the company will encumber Phoenix with the shares of the frequent flyer company. In addition, EL AL will be required to comply with various restrictions, such as taking out an additional loan, meeting financial criteria, etc., which will be determined later.
At this stage, it is an agreement in principle that will remain in force for 90 days from the date of its signing. It will be recalled that the state obliged El Al to raise another $ 100 million in return for assistance provided to it and for this purpose to sell part of the frequent flyer club by March 14, 2022. This is in order to strengthen the airline’s liquidity. Failure to fulfill EL AL’s obligation to raise the amount in question will constitute a fundamental breach of the agreement with the state, in which case the state will have the right to provide the last assistance given to it in the amount of $ 30 million for immediate repayment.