Last Friday afternoon, Keren Terner Eyal, the treasury director general, informed El Al Airlines chairman Yehuda Levy by letter that changes had been made in the ministry’s requirements for the airlines’ planned share offering. It set a new deadline for completing the sale of no later than September 15, set a new minimum price and stated that the extent of the government guarantees for the loan El Al would be offering would only be determined after the sale.
Terner Eyal also informed Levy that the government was reducing its original commitment to buy up all the $150 million in shares in the upcoming offering, if the public failed to, though it reserved the option to do so later by exercising options.
The news of yet more changes in the government’s position has characterized its bizarre behavior toward Israel’s flag carrier since the onset of the coronavirus. The treasury hasn’t been transparent in its dealings with El Al, giving the impression that it has other goals that it doesn’t speak about publicly. One of them, it seems, is to wrest control of the airline from Tami Mozes Borovitz’s company Knafayim.
Behind the scenes, immense political pressure is being exerted on the government to favor Eli Rozenberg, the 29-year-old yeshiva student who wants to buy control of the airline. Rozenberg is the front man for his father, Kenny, who in turn is close to Rabbi Pinchas Abuhatzeira, a spiritual leader whose own fortune is believed to be in the tens of millions of dollars.
The structure of the share offering creates a wall between itself and the state loan guarantees. The government refuses to promise categorically it will back the loan until El Al completes the offering. Gonen Usishkin, the airline’s CEO, has warned the treasury that without explicit guarantees the share sale will fail.
While there is good reason to wonder whether Usishkin is simply defending the interests of Mozes Borovitz, who wants to keep control of El Al, there is a lot of good sense to his claim. Usishkin says with justice that investors, in particular foreign investors, won’t be lining up to buy stock in a company whose future is so risky, not only due to the coronavirus but questions about its ability to borrow the money it needs to stay afloat.
It was under these circumstances that El Al’s board on Monday declared support for the rival bid of Israeli-Russian businessman David Sapir. Sapir is ready to pump $51 million into the airline in exchange for a 27.7% stake, which would turn him into an equal partner with Mozes Borovitz. Sapir said he was ready to do that without a public offering, although he doesn’t preclude one at a later date.
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In the best of circumstances, the treasury is increasing the uncertainty El Al is already coping with and preventing it from maximizing the proceeds it can get from the offering.
In addition, everyone involved in the process agrees that $150 million is far from enough money. If El Al passes into the control of another, the new controlling shareholder will need at least the other $250 million the state-guaranteed loan is supposed to provide. Rozenberg’s associates have hinted that if he gets control, he may even seek backing from the state for a loan of $400 million.
If so, why is the government being so stubborn about not committing to the guarantees until later? Even if El Al were to resumes flights next week, which under the current circumstances seems highly unlikely, it will be still be suffering severe cash flow problems for quite some time.
Another question is why the treasury issued its ultimatum so close to the offering date. The ministry seems to have done everything it could to delay coming to El Al’s aid over the last five months. Yet suddenly it demands that the offering be completed quickly, before Rozenberg’s rivals for control of the airlines – Sapir and Israeli-British property investor Meir Gurvitz – have been given a license to control the airline.
If the treasury’s goal is to encourage competition for El Al, why is it seemingly trying to limit the number of bidders? Apart from Rozenberg, who has a license, the other potential buyers know they are taking the risk they won’t get approval. They risk buying up shares in the offering for no reason at all.
On Thursday, Rozenberg appealed to the finance and transportation ministries to set a September 16 deadline for the share offering. If so, he said he would commit to buying $101 million of the stock at 67 agorot (20 cents) a share. A day before, Transportation Minister Miri Regev told El Al to announce the offering date within 48 hours or file for bankruptcy. Meanwhile, pilots union officials, who have admitted privately they are cooperating with Rozenberg, attacked the board for allegedly favoring Mozes Borovitz.
If that isn’t enough, Rozenberg announced last week that Jason Greenblatt, President Donald Trump’s former Middle East adviser, had joined Kanfei Nesherim Aviation (Eagle’s Wings), the company he has formed to buy El Al. He said he would appoint Greenblatt to the El Al board if he wins control of the airline
In other words, Rozenberg was signaling that the route he plans to travel to gain control of El Al goes through the corridors of government, in particular Prime Minister Benjamin Netanyahu’s bureau. Terner Eyal seems ready to help.