El Al and the Ministry of Finance signed a new agreement under which El Al will repay the debt to the state in the amount of 45 million dollars earlier than planned – about two years before the original date – this is in order to remove limitations and barriers that will allow El Al to act to increase business growth and expansion. At the same time, the state will transfer to El Al by the end of the year 20 million dollars – advance payments for security expenses to the company, which actually offsets the amount that the company will transfer to the state and will put it at 25 million dollars.
El Al recently announced that Warta may revoke its cargo transport license because the company does not meet the license conditions that require it to operate two cargo planes. El Al currently operates a cargo plane on a wet lease (ie, including crew) and has announced that it intends to purchase a Boeing 737 cargo plane, but this is a procedure that takes several months. RTA’s decision regarding the revocation of the license is expected to be made in the coming days, and if RTA decides to postpone its decision for a few months, it is a decision that will help the company return to growth and also of course provide the Israeli air cargo market with much-needed capacity – especially for the agricultural sector.
The CEO of El Al, Dina Ben Tal Gnansia, said: “Against the background of the desire to establish the growth of the company and the improvement in its financial results, and in order to create managerial flexibility, among other things, by way of investments in the company’s working capital, also in light of the increase in demand, an agreement was reached between the management of El Al and the Ministry of The treasury for speeding up the repayment process of the bond presented to El Al, by the state in the amount of 45 million dollars, this is about two years before the planned date. I am sure that the move will lead to improving El Al’s ability to grow and face a competitive market with a changing reality.”
In the agreement that was signed, it was determined that the company will repay a debt of 45 million dollars that was advanced to the company by virtue of the aid agreements as loans by the state against the allocation to the state of bonds converted into company shares by December 20, 2022.
The date of the public offering in the amount of 62 million dollars will be postponed until April 1, 2023 and during this period the company will be entitled to strengthen the capital structure in alternative ways to carry out the public offering, such as the implementation of the frequent flyer club deal.
At the same time, it was decided that the state will advance payments for security expenses to the company, in the amount of 20 million dollars, and will transfer them to the company until December 2022. The aforementioned security expenses payments will be returned by the company until April 1, 2023.
Upon completion of the debt repayment by the company, most of the obligations imposed on the company as part of the aid agreements will be adjusted or canceled, mainly in relation to the limitations on the scope of expenses which will allow for an increase in expenses for future expansion of revenues such as: adjustment of production capacity through wet leases of aircraft and adjustments in manpower (including – Flexibility in how to operate the human resources teams), updating the company’s route network, and investing in the company’s working capital as well as developing additional income channels.
The restrictions on dividend distribution and own purchase of shares (this restriction remains until the end of 2028) as well as the restriction on the transfer of the company’s rights in slots, without prior written approval of the state until December 31, 2030, remain in place. Also, the company’s obligations in connection with the execution of transactions with officers, interested parties or controlling owners will be reduced and adjusted.
El Al stated that “El Al’s management thanks the Minister of Finance, the Director General of the Ministry, the Head of the Budget Division, and the Accountant General for the assistance and support in the summary of the understandings detailed above.”