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ZIM Integrated Shipping Services (ZIM) has confirmed that its proposed financial restructuring plan is nearing final approval. Detailed updates to the plan are included in the transaction report published on Sunday by ZIM’s parent company, Israel Corporation. The report has been released in preparation for Israel Corporation’s general shareholders’ meeting, scheduled for 1 November.
In a significant show of support by the company’s stakeholders, ZIM has secured agreements and understandings in principle with banks, bondholders, shipyards and ship owners holding more than 95 percent of the company’s debt and obligations. Importantly, an agreement has also been reached, and formally approved, with the bondholders’ committee.
While negotiations have been ongoing, ZIM took the lead with a number of initiatives designed to streamline operations, including rearranging several lines, and rationalizing staff numbers.
The latest updates outline a combination of deferred debt repayments and new financing arrangements. These measures strengthen ZIM’s operating base in the short term, and will enable the company to trade its way back to profitability and growth promptly as world trade recovers from the current global crisis.
According to the plan, ZIM will receive more than US$500million in new financing from the company’s banks (both Israeli and foreign), to be provided in 2009-2010. This funding will be scheduled for repayment over more than 10 years and enable ZIM to finalize its purchase of new vessels in the coming years. Delivery of most of ZIM's ordered vessels has already been deferred by periods of two to five years.
This funding is part of a larger restructuring agreement with the banks that also includes the rescheduling of debt repayments – with repayment periods in some instances extending up to 10 years. Additionally, the banks have also agreed to grant ZIM full or partial grace periods of up to three years on principle repayments.
Israel Corporation will invest more than US$450million, which includes the conversion of existing loans; and along with related parties will provide a US$100million safety net to ensure sufficient liquidity for ZIM should circumstances require.
Israel Corporation will also retain an option for a financial reserve of US$50million, to be used as needed for ZIM's liquidity needs and operational purposes, for Israel Corporation to utilize at its discretion.
ZIM’s bonds (worth approximately US$350million), which were previously due for repayment between 2012-2015, will now be paid in full and deferred to 2016, with an option to defer further to 2017-2020. Similar terms will be offered to ZIM’s unsecured lenders.
As part of the plan ZIM will continue to operate its existing fleet, which will be increased in the coming year by a number of new, modern ships.
Nir Gilad, Israel Corporation CEO, said: "This plan stabilizes ZIM’s financial position and creates a solid foundation for the company. This will enable ZIM to overcome the current shipping crisis successfully and provide a strong return on Israel Corporation’s investment.
"The complexity and scale of this restructuring plan are so great that it can only be achieved with the participation and cooperation of all parties.”
Rafi Danieli, ZIM CEO, added: “We are pleased to have reached agreements with so many parties who expressed their confidence in the company.
“Many analysts are pointing to signs of an industry recovery, with expectations that most companies will break even in 2010, and return to profitability in 2011. The financial arrangements detailed in the latest transaction report will enable ZIM to capitalize on this recovery.
"In addition to the support of our stakeholders, we are also grateful for the ongoing confidence shown by ZIM’s customers and suppliers. This has only been achieved with an intense focus on maintaining the high levels of service our customers expect and deserve, and by continuing to meet all suppliers’ obligations,” said Mr Danieli.
(Source: Transport Weekly)
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