Zim looks to cancel, defer ship orders

 

   Zim Integrated Shipping Services said it is conducting negotiations with shipyards with the goal of canceling the purchase of a portion of the ships that it has ordered or to defer delivery dates.

   Israel Corp., which owns 99 percent of Zim, said in a letter to the Tel-Aviv Stock Exchange Thursday that it is also seeking to reschedule part of payments in relation to the purchase of ships by providing credit to Zim for certain sums.   The company said negative developments in the international shipping market have increased in their intensity during the present period, pointing to the high supply of ships in relation to a moderate demand, which leads to an increasing fall in the use of ships and in transportation fees.

   The continuation of the difficult conditions in international shipping markets continues to influence Zim in a negative manner, it said, hurting business results, its compliance with financial covenants and its ability to raise capital as well as the terms of its financing.

   According to the information service AXS-Alphaliner, Zim is the 17th-largest container shipping company in the world with 31 owned and 71 chartered ships with total capacity of 277,556 TEU. AXS-Alphaliner said Zim has 41 ships with aggregate capacity of 290,738 TEU on order.

   Israel Corp. said in the letter to the stock exchange that it has laid up 16 ships whose capacity amounts to 20.5 percent of the total transportation capacity of Zim, but said, This figure is expected to increase during the course of 2009 so long as the financial crisis lasts.

   Israel Corp. said, "Pursuant to contacts which have taken place between Zim and those banks which are financing Zim, the majority of the banks have agreed to change or waive compliance with certain financial covenants until the end of 2008," and that some banks agreed to waive compliance for a longer period. Because of this, Zim said it believed it would comply with the financial covenants at the end of 2008 except for certain financial covenants totaling $35 million.

   In the same letter, Israel Corp. repeated a statement it first made last November, that it would be willing, in principle, to provide Zim with up to $150 million during the course of 2009, if needed and at its discretion, depending on conditions in the shipping and credit markets.

   Zim and the banks financing ships are planning to hold talks over the next two months over $1.35 billion related to the financing of the ships and Zim's financial covenants. The company said that based on the results of contacts between Zim, the shipyards and the banks, it will be possible to assess the influence of the crisis on the financial position of Zim and that it would report to the stock exchange.

   The Israeli business magazine Globes reported on its Web site that Israel Corp.'s shares rose 10.7 percent Thursday because of expectations that Zim would benefit from an announcement that Maersk Line was imposing a general rate increase on Europe/Asia cargo.

   Globes quoted Psagot Investment House analyst Noam Pinko as saying, This rate hike will lead competitors to follow suit.

Source: American Shipper