El Al Israel Airlines (LY, Tel Aviv Ben Gurion) has signed a non-binding agreement securing a USD130 million loan from Phoenix, an Israeli provider of insurance and financial services, it confirmed in a Tel Aviv Stock Exchange filing on March 15.

The development followed local media reports in recent days that the two companies were in advanced talks on the loan, whose details had been submitted to the country’s Ministry of Finance for approval.

The interest that the cash strapped, majority privately-run flag carrier will have to pay is “in the range of 5.5% to 7%”, lower than the 7% and 8% mentioned in the earlier reports, but final terms such as the frequency of payments are still “to be determined in a detailed agreement,” it said in the disclosure.

It will put up its Matmid Frequent Flyer Club as collateral for the loan, and an options mechanism has been set up in which Phoenix will have the right to buy 25% of the loyalty scheme’s shares, to be exercised at any time until December 12, 2027.

El Al had previously said, in January, that it would sell part of its frequent flyer club to raise at least USD100 million. The government later approved a postponement of the deadline for the fundraising to March 14, as part of the terms of a USD210 million bailout package. The airline had previously been in talks to sell a stake in the club to Bank Hapoalim.

The agreement in principle with Phoenix will remain in force for 90 days, during which time the two parties must reach a final loan agreement or else it will be terminated unless extended. El Al is restricted from taking out additional loans during the period.