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Banks freeze credit to Tower Semiconductor after state withholds subsidies

Government claims the company failed to create jobs, provide collateral

Israeli banks are freezing credit to Tower Semiconductor (Nasdaq:TSEM) and tightening the terms of existing loans after the State of Israel withheld promised financial support for the company, Ma'ariv reports.

The state is suspending payment of a NIS 15 million grant promised to Tower for the construction of its Fab 2 facility in Migdal Haemek.

The state, through the Ministry of Industry and Trade, claims that Tower failed to meet certain terms regarding export volumes and job creation.

Also, Tower's controlling shareholders, among them the Tel Aviv-listed Israel Corporation, have refused to provide collateral for the grants as required by the ministry.

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Top Israel Corporation executives including chairman Idan Ofer will be meeting today with Industry and Trade Minister Dalia Itzik to discuss a compromise to free the state's subsidies.

Altogether the state has agreed to provide $250 million of the cost of Fab 2, the construction of which will cost more than a billion dollars.