Israel's El Al Airlines considers public bond sale in fight for survival

By Steven Scheer

JERUSALEM (Reuters) - El Al Israel Airlines is considering a bond sale to the public as it fights to stave off collapse after failing to reach a deal on a state-backed loan to help it recover from the COVID-19 pandemic.

Israel's flagship airline, which also reported a third-quarter loss on Wednesday, had secured government backing for 75% of a $250 million loan conditional on the group slashing expenses and issuing $150 million worth of new shares.

The company held the share sale last month, resulting in the 27-year-old son of a U.S. nursing homes tycoon taking a controlling stake. It also agreed with unions to cut 2,000 jobs and reduce the salaries of the highest paid.

But El Al said on Wednesday it had failed to reach an agreement for a loan with a financial entity and so was "considering an alternative of raising the loan by issuing bonds to the public."

"At this stage there are significant doubts about the continued existence (of the company) as a going concern," it added.

CEO Gonen Usishkin said the airline was cutting costs to try to return to growth.

"However, without the support of the government, which will provide El Al with the necessary backing so we can advance the debt raising, El Al will have difficulty meeting its future obligations and will face the danger of collapse," he said.

Israel's finance ministry said El Al had asked to change the terms of the loan guarantee, without giving details.

Airlines across the world have been hammered by travel restrictions to tackle the pandemic. Germany's Lufthansa and Franco-Dutch group Air France-KLM have both had state bailouts, while Norwegian Air last week sought bankruptcy protection.

With Israel's borders shut to foreigners, El Al lost $147 million in July-September as it operated just a handful of flights. That compared with a net profit of $27 million a year earlier. Revenue plunged to $39 million from $647 million.

El Al's shares were 4% lower in afternoon trade in Tel Aviv.

A month ago, the airline resumed flights for Israeli citizens to several destinations in the United States and Europe. Flights to Moscow are set to restart this week and flights to Dubai are slated to start next month. Usishkin said he hoped to further expand operations.

The lone bright spot for El Al has been a drop in fuel costs and expenses, which declined 80% to $101 million in the quarter. However, it still owes $240 million of refunds to passengers who bought tickets prior to the flights being halted.

(Reporting by Steven Scheer; editing by Kirsten Donovan and Mark Potter)