Drawn out privatization of Ashot Ashkelon pressuring company
Firm relying on credit from suppliers rather than banks
The drawn-out privatization process of former Israel Military Industries subsidiary Ashot Ashkelon is harming the gear assembly company's ability to continue receiving credit from the banks. The company's credit from banks has fallen to NIS 17 million, and the banks are not rushing to aid it despite its rising revenues.
On the first page of the company's financial statements published over the weekend, there is a warning the firm's accountants regarding the company's ability to maintain its funding, due to uncertainty over whether its credit line will be renewed.
Because of the cash crisis, Ashot Ashkelon recently signed a deal with customers under which they would transfer NIS 25 million to the company in return for future deliveries.
Ashot Ashkelon was sold in July 2005 to a group headed by Avraham Burg, former Knesset chair, for NIS 16.7 million. After allegations surfaced regarding the group's sources of funding, a Knesset committee held a hearing in September regarding the sale process. A ministerial committee for privatization decided to continue the process while requiring alternative funding sources.
In December the Movement for Quality Government in Israel petitioned the High Court of Justice with a request to halt the transaction. It demanded to investigate allegations that the buyers' group was announced as a "preferred bidder" in the sale and provided "false detail" to state authorities during the transaction.
Around the same time, State Comptroller retired judge Micha Lindenstrauss criticized the sale procedure due to the criminal suspicions against its financers.
In Ashot Ashkelon's annual report, accountants wrote that due to the extended and unexpected delays in the privatization process of the company and uncertainty over when it would be completed, the company was being forced to rely increasingly on credit from its suppliers. The company believes that canceling privatization would allow it to renew its credit line enough to allow ongoing operations, the accountants wrote.
In addition, the report notes that workers had declared a labor dispute in light of privatization, and that the company may have to make several million shekels worth of concessions.
Ashot Ashkelon, which designs, develops, and manufactures gear drives and transmission systems, employs around 400 people.