Alon Blue Square Israel Reports Understandings With Isarel Discount Bank, Approval of Loans with Alon Israel Oil Co.

Alon Blue Square Israel Ltd.

(hereinafter: the "Company") announced today that following the previously announced plan of recovery and arrangement of its subsidiary, Mega Retail and the approval of the arrangement by its board of directors, the Company has reached understandings with Israel Discount Bank Ltd. Under the understanding reached, the on-call loan provided by Israel Discount Bank Ltd. to the Company will be extended to September 30, 2015, during which period the Company will not be required to make any principal payments to any of the banks and/or bondholders (and the Company has no intention to make such principal payments before this date). In addition, the Company agreed to use its efforts to finalize a settlement with the banks prior to September 30, 2015. In the event the settlement with the banks is not finalized by this date, Israel Discount Bank Ltd. will examine its approach with respect to the credit provided to the Company. Mega Retail therefore reported to the Israeli District Court that all conditions for the plan of recovery and arrangement of Mega Retail had been satisfied and that the Company intends to fulfill the financial undertakings it undertook in connection with Mega Retail arrangement. Loans from Alon Israel to the Company Following the satisfaction of all conditions for the effectiveness of Mega Retail's plan of recovery and arrangement, pursuant to approvals of the Company's board of directors and audit committee, Alon Israel Oil Company Ltd. ("Alon Israel"), the controlling shareholder of the Company, will transfer to the Company the sum of NIS 95 million as a bridge loan (the "Bridge Loan") for the purposes of the abovementioned arrangement in Mega Retail. The Bridge Loan will be repaid from the proceeds of a rights offering of the Company, when completed. In addition, Alon Israel will provide long-term credit in the amount of NIS 60 million ("Long-Term Credit") which would be repaid after the repayment dates to be agreed with the banks and be subordinate to the debts to the banks and bondholders. Lastly, Alon Israel will provide a bridge loan of NIS 50 million (as a framework) ("Framework Bridge Loan") to be used for the purposes of Mega Retail from time to time on the basis of on-call and to be repaid from the sale of assets by the Company, Each of the Bridge Loan, Long-Term Credit and Framework Bridge Loan will be provided to the Company without any collateral or interest, other than a linkage to the Israeli CPI (on the basis of the base index known on date of approval). Therefore, these loans were approved by the Company's audit committee and the board of directors as a benefiting transaction, in accordance with Section 1(2) of the Companies Regulation (Reliefs In Transactions With Interested Parties) - 2000. Under the applicable regulations, no shareholder approval is required for these transactions so long as holders of 1% of the issued share capital or voting rights of the Company do not object to the transactions within 14 days of the submission of this report.