El Al Israel Airlines has asked the Israel Securities Authority for a permit to issue a shelf prospectus for the sale of shares for a total of NIS 505 million ($146 million) this week, the troubled airline said in a filing on Sunday.
The publication of the prospectus for the share sale is subject to the approval of several bodies, including El Al’s board of directors, the Tel Aviv Stock Exchange and the government, which needs to approve a proposal to partake in the share offering should investors not buy all of the shares offered.
The share issue is part of a $400 million rescue package formulated by the Finance Ministry, consisting of government-backed loans for a total of $250 million with guarantees for 75 percent of the loan in case of defaults; the share offering on the Tel Aviv Stock Exchange at a minimum price of NIS 0.671 per share to help prop up the equity of the firm, which has more than $2 billion of net debt; and efficiency steps, including cutting back on 2,000 workers.
Under an updated framework from September 4, the Finance Ministry has committed to buy shares in the firm for a total of NIS 264.2 million, or the equivalent of around a 40% stake in the firm, which would make it the biggest shareholder, should investors not snap them up during the offering. The government has committed to transferinf the shares it attains within 24 months of the offering, and will not make use of the voting rights it will get together with the shares.
The share offering and the rescue package come as the firm has been grounded by the coronavirus pandemic, causing it to put 80 percent of its 6,303 workers on unpaid leave, cut management’s and directors’ salaries by 20%, halt investments, and sign accords for the sale and lease-back of three Boeing 737-800s. The firm owes some $350 million to passengers whose flights were canceled because of the pandemic.
Meanwhile, three groups have expressed an interest in acquiring a stake in El Al. Eli Rozenberg, the son of US nursing home chain owner Kenny Rozenberg; David Sapir, a Russian-Israeli businessman involved in tourism and telecommunications in Russia, who has offered to pay $51 million for 190 million new shares in El Al, according to an El Al regulatory filing; and reportedly Meir Gurvitz, a British-Israeli businessman who has real estate activities in the UK and US.
Revenues at the airline for the second quarter of the year plunged by 74% to $152 million, with the company recording a net loss of some $105 million for the quarter, compared with a $100,000 net profit in the same quarter in 2019. In the first half of the year, revenue had dropped 53% to $472 million from $1.01 billion in the first half of 2019, the company said. Net loss in the first half of 2020 widened 344% to $244 million, from a net loss of $55 million in the first half of 2019.
Knafaim Holdings Ltd. holds a 38% stake in the firm, the Ginsburg Group holds and 8% stake and the public a 54% stake, according to a company presentation filed to the Tel Aviv Stock Exchange. As of September, the airline had a fleet of 45 planes, 27 of which are owned by the airline and 18 of which leased. The average age of its aircraft is 9.4 years, compared to 13.7 years in 2017.
The nation’s flagship airline flew 5.8 million passengers and 74,500 tons of cargo in 2019, the presentation said.