Zim Line optimistic about the future

[September 27, 2010]

Financially challenged Zim Integrated Shipping Services has moved to reassure customers that its future is optimistic. The carrier said that it has 'secured agreements and understandings in principle with banks, bondholders, shipyards and shipowners holding more than 95% of the company's debt and obligations'. 

An agreement has also been formally approved with the bondholders' committee to reschedule its debt. 

All steps taken so far still have to be approved by shareholders of parent company Israel Corporation,
 which are next due to meet on November 1, 2009.

If approved, according to agreements reached so far, Zim Line will receive more than USD500 million  of new financing from the company's banks (both Israeli and foreign) between 2009 and 2010. The funding will be scheduled for repayment over more than 10 years to enable Zim Line to complete new vessels purchases.

Existing debt will also be rescheduled, with repayment periods in some cases extending up to 10 years. Moreover, the banks have agreed to grant full or partial grace periods of up to three years on principle repayments.

Moreover, Israel Corporation will invest over USD450 million, which includes the conversion of existing loans. Along with related parties, it will also provide a USD100 million safety net to ensure sufficient liquidity for Zim Line, should it be necessary. 

And Zim bonds worth approximately USD350 million, which were previously due for repayment between 2012 and 2015, will be deferred to at least 2016.

Although it has been confirmed that some shipyards have agreed to postpone newbuild deliveries (at a price), the extent to which the owners of the vessels chartered by Zim Line have agreed to help out remains unclear. Earlier this month Danaos contested Zim Line's decision to unilaterally reduce the amount of charter hire paid for six container vessels by 35%.   
       
In summary, most stakeholders appear to have accepted the conclusions of the independent report commissioned by Israel Corporation stating that Zim Line had a viable future, despite some of its assumptions about cargo flow and freight rates levels being contentious, and the fact that Zim Line's financial performance over the past eighteen months was worse than most. For every dollar of revenue earned in 2008, it lost 5 cents at operating level (EBITDA), and during the first six months of the year it lost 26.6 cents. 


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