Israel Military Industries' (IMI) estimated debt to Bank Hapoalim (LSE:BKHD; TASE:POLI) currently stands at $110 million, after IMI took out a loan in 1998 to fund the early retirement for thousands of its workers. Sources inform ''Globes'' that IMI has not yet begun paying back the loan, which has grown over the past six years by $20 million.
IMI blames the Israel Land Administration (ILA) and the Ministry of Finance for not honoring an agreement made before IMI took out the loan. As part of this retirement and health benefits agreement, IMI vacated a portion of its Ramat HaSharon manufacturing plant.
Rezoning the land and selling it for construction was supposed to fund the early retirement plan. From IMI's point of view, it had taken a bridging loan to tide it over until the land was sold. The ILA, however, has not released the land to this day.
Over the past few days, IMI's management has been conducting talks with the heads of the Ministry of Finance and the Ministry of Defense, in an attempt to raise funds so that it can make payments to workers who took early retirement. Yesterday, "Globes" reported that IMI had stopped payment to the 1,600 former IMI employees who had taken early retirement since 1990. These pension recipients continue receiving a salary from IMI until reaching the age of mandatory retirement. They are currently owed NIS 9 million.
In addition, IMI owes several hundred million shekels to its suppliers. The Federation of Israeli Chambers of Commerce estimates the amount owed, as of last month, was NIS 300 million.
Sources at IMI claim that the Ministry of Finance, and the Ministry of Defense are trying to engender a crisis at IMI to hasten its privatization and dissolution. The sources claim that a crisis would circumvent worker opposition to changes in company structure before their collective work agreement expires at the end of 2006.
Published by Globes [online] - www.globes.co.il - on Monday, September 06, 2004