Elron, Rafael breathe fresh life into Starling

Starling Advanced Communications, which develops antenna systems for satellite communications, has received a $7 million loan from its controlling shareholders, Elron Electronic Industries and Rafael Development Corporation.

	Shimon Eckhaus
	Photo by: Itzik Ben-Malki

This isn't the first time the IDB Group's Elron and RDC, in which Elron holds a majority stake, have injected funds into Starling. The recent announcement comes on top of almost $20 million lent to Starling since October 2008.

Starling needs the cash. It has been operating in the shadow of a going-concern warning since its initial public offering in 2007, and its financial woes worsened last year.

"The company suffered losses of about NIS 40.4 million in 2009," its accountants noted. "The company has a negative cash flow of NIS 35.3 million from ongoing operations. This comes in addition to a NIS 29.4 million deficit in working capital and a capital deficit of NIS 60.8 million."

And Starling doesn't have a wide range of financing options. Last year management told the board of directors it had been in touch with banks in Israel in the hope of securing a loan. But the banks were not interested, especially without shareholder guarantees or collateral. At the end of the first quarter this year, Starling had about NIS 105 million in liabilities, including about NIS 70 million in shareholder loans.

The new loan from Elron and RDC is being made at Libor plus 6%, and is designed to help shore up the company's cash flow, which is essential to its ongoing operations.

'Events in the markets'

In justifying the additional credit request, Starling said it "needs outside financing, among other reasons, [due to] events in the capital markets in Israel and internationally, the uncertainty prevailing in the markets and the worsening terms for obtaining credit."

The loan was to be for two years, but management asked that it be extended to 36 months from the time of the first payment. "A failure to extend the time for loan repayment as soon as possible would make it difficult for the company to continue operations and meet its obligations," the board said.

Elron took the company public on the Tel Aviv Stock Exchange in 2007; it is currently trading at a market cap of about NIS 20.8 million after losing 80% of its value since the IPO.

Starling develops antenna systems for broadband satellite communications for people traveling by plane, train or car. Rafael has a 36.55% stake in the firm, with Elron holding 31.5% and Elbit Systems 16%.

Starling had some extra good news for shareholders. It announced the appointment Monday of Shimon Eckhaus as chairman, replacing former Israel Defense Forces chief of staff Dan Halutz, who resigned after three years in office.

Eckhaus is the former CEO of ImageSat, which operates two satellites serving customers around the world. Before his work at ImageSat, Eckhaus was vice president for marketing and business development at Israel Aerospace Industries.

As Elron's chairman Arie Mientkavich put it, "Starling is now adding a chairman to its ranks with proven qualifications and abilities, [and] with relevant experience in its field of endeavor. I have no doubt that Shimon Eckhaus' experience from the world of aviation and satellites will contribute greatly to the continued development and success of the company in the future."