October 4, 2022

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Pressure Increases on PM for Conditioning Sale of Oil Refineries

2 min read

On Monday, the decision of approving a controversial deal that would permit a petrochemicals company to take over the biggest oil refinery in Israel was left to Prime Minister Yair Lapid.

This was after a debt restructuring plan had been approved by the court, which would cost about a billion shekels.

The sale has already received the approval of the energy and finance ministries.

The problems

Lapid is facing mounting pressure from Knesset lawmakers to add a condition to the sale of the shares of the Ofer family in Bazan oil refineries to Israel Petrochemical Enterprises Ltd.

This condition is to shut down the complex in Northern Israel in a decade, something that the government had decided to do back in March.

However, environmental groups had been disappointed because there had not been a budget or timetable mentioned for developing that particular region of the Haifa Bay.

Haifa residents had been campaigning for the shutdown for years, which eventually led to the vote that also had the support of environmental activists.

This was primarily because of considerable air pollution and an above-average number of cases of respiratory disease and cancer in the area.

The condition

MK Alon Tal of the Blue and White party wrote a letter to Prime Minister Lapid, asking him to add the condition of the closure of Bazan within a decade.

The letter also asked the premier to get a written agreement from the buyer to abide by the condition and not to continue with the polluting operations.

He also urged Lapid to take advantage of his authority for ensuring that the debt settlement made with Israel Petrochemical Enterprises Ltd. would not harm the public.

The buyer

15% of the stock of the Bazan oil refineries is owned by Israel Petrochemicals, which is enough for the company to become a joint owner.

It also leveraged its right of refusal for vetoing a bid that the Hagag Group of property developers had made for Bazan.

Hagag had made the bid because they wanted to adopt the masterplan involving replacement of the petrochemical companies with transportation and residential projects in the area.

However, Israel Petrochemicals was not in the position to buy Bazan’s sole ownership because it was broke and did not have the cash to do so. After all, its assets were less than its debts.

Institutional investors like insurance and savings companies, pension funds and banks own half of its bonds, which are responsible for investing and managing the money of the public.

The company managed to get representatives of these institutional investors to agree to waive off its debt of about one billion shekels.

On Monday, the Tel Aviv District Court had given its approval for the agreement. Also called ‘haircuts’, these debt settlements are made when a company cannot pay off its debts.

In this situation, bondholders understand that the best arrangement is a deal. But, not everyone is happy with the court’s decision, as it would mean continuing pollution of the environment.

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