State to Forgive NIS 18.5 Million of Habima Theater's Debt

Other theater companies also expected to demand taxpayer relief of own debts.

The recovery plan worked out between the Habima Theater and the finance and culture ministries, a copy of which Haaretz has obtained, exposes the extent of the support the national theater will receive to keep it alive, as it prepares to return to its renovated home.

The centerpiece of the agreement is the erasure of NIS 18.5 million of the NIS 24 million Habima owes the state, the legacy of a loan extended in 1995 to keep the theater from closing. Under the terms of the new deal, signed about a month ago, Habima has agreed to a number of austerity measures, including capping the per-performance fee paid to "star" freelance talent to NIS 4,100, including VAT - a reduction of at least 10 percent.

Habima Theater - Moti Milrod - 16112011
Moti Milrod

Other Israeli repertory theaters are demanding relief for their own, smaller, debts, and complaining that Habima receives preferential treatment. A few months ago, these theater companies banded together and threatened to go to the High Court of Justice with their claims of debt forgiveness discrimination. It can be assumed that the details of the Habima debt restructuring were kept secret for fear of how the national theater's colleagues would react.

Habima's total debt burden, including the NIS 18.5 million that will be forgiven, amounts to NIS 42 million. In 2010, restrictions were placed on the theater's bank account, and removed only after Habima administrators put up personal guarantees.

After the NIS 18.5 million owed to the state goes away, Habima will be NIS 5.5 million in arrears to the state. That balance will be frozen for five years, after which it will have to start paying that back.

The cancellation of most of the debt to the state is conditioned on settling accounts with suppliers and other creditors within 90 working days. Of the remaining NIS 18 million owed by Habima to nongovernment entities, NIS 13 million is owed to performers, playwrights and the like. To deal with that, the Culture and Sports Ministry will give Habima NIS 6.5 million beyond its operating budget, against a loan for the same amount the theater will take out. This should settle the debt to suppliers and creditors, assuming they agree to forgive some of what they are owed. The ministry is also allocating NIS 6.3 million to Habima for moving-in expenses, after the theater's four-and-a-half-year absence while its Tel Aviv home was renovated.

As part of the recovery agreement, Habima has agreed to austerity measures, including giving 14 employees early retirement and hiring seven new, cheaper people to replace them. It will also have to increase revenues, and Friends of Habima will have to raise more money from donations and sponsorships.

An external auditor from the Culture and Sports Ministry will supervise the implementation of the recovery plan. This non-negotiable component of the agreement was a major sticking point that was met with considerable resistance from Habima representatives in the negotiations. The auditor is to report to a monitoring committee composed of Culture and Sports Ministry Director General Orly Fruman, Finance Ministry Deputy Accountant General Yair Tal and Reuven Kogan of the treasury's budget division.