Ashot Struck by Credit Woes

The strange privatization process of Ashot Ashkelon is harming the gear assembly company's ability to continue receiving credit from the banks. The company has reduced its credit by NIS 17 million, and the banks are not rushing to aid it despite rising revenues.

On the first page of the company's financial statements published over the weekend, there is a warning by accountants. The warning is over Ashot's ability to maintain funding because of the uncertainty over whether its credit line will be renewed.

Because of the cash crisis, on Thursday Ashot signed a deal with its clients under which they would transfer NIS 25 million to the company in return for future deliveries.

Ashot was sold in July 2005 to a group headed by Avraham Burg, former Knesset chair, for NIS 16.7 million. After allegations were made about the buyers, the Knesset state control committee held a hearing in September regarding the sale process. The committee handed its conclusions to a ministerial committee for privatization, which decided to continue the process while altering Burg's funding source.

Ashot's accountants wrote that due to 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, it 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.