Published On: Tue, May 20th, 2014

The Israeli Government Has Approved A $3 Billion Restructuring Plan For Zim Shipping

Zim Shipping released the details of its new restructuring plan on Monday.

ZIM IDAN OFER

A new plan to restructure Zim Shipping has been approved by its owner, Israel Corporation, and the Israeli Government, this according to a press release. The $3 billion plan includes the conversion of $1.4 billion of debt into equity in the company. The company released a statement after negotiations with the Israeli government in which it said that the deal came, “following a protracted and complex series of negotiations.”

One of the problems which the company has had to deal with are certain limitations imposed on it after it was privatized ten years ago. Reportedly, the Israeli Defense Ministry has agreed to changes in its “golden share” in Zim. The company said that this was key in, “eliminating provisions that stand in the way of implementation of the restructuring agreement.” The Defense Ministry was concerned with matters affecting Israel’s strategic interests.

New funds can now be raised which will be used to purchase more ships.

Idan Ofer

Rafi Danieli, Zim’s Chief Executive Officer, said, “The New Zim with its strong balance sheet is well placed to open a new exciting chapter in its development. We are delighted to have reached these agreements after many months of hard work. We are grateful to IC for all of its support and additional investment and to all our creditors for their efforts to get us to this point and for the support they have given to the management team and the business plan.“

The company’s creditors and investors must first approve the deal. Zim’s primary owner, the Israel Corporation, is investing another $50 million in the company and pumping in another $50 million in cash. Israel Corporation will also write off $225 million of the company’s debt. Other comopanies are helping in the deal by changing their current contracts with Zim to its advantage and writing off a total of $180 million in loans.

A total of $1.4billion has been pumped into Zim, now valued at up to $800 million, by Israel Corporation and other companies. Israel Corporation’s will see its stake in Zim drop from 100% of the company to only 32%.
Zim Shipping should now be able to move forward with a long delayed initial public offering.

Just last week the company’s Haifa offices were shut down for a few days due to a work stoppage. Its management came to an agreement with its employees that they would return to work while negations over a new contract continue.

The company’s woes have even affected other shipping lines. Last week Greek container ship owner Danaos Corporation posted a weak first quarter result due largely to the impact from the restructuring of Zim. Its CEO John Coustas said, “This decrease is mainly a result of the previously announced Zim restructuring which accounts for $6m in lower operating revenue.”

The tenth largest shipping company in the world, Zim Integrated Shipping Services Ltd. Is Israel’s largest cargo shipping company. Headquartered in Haifa, it was formerly known as Zim Israel Navigation Company. Its US headquarters are located in Norfolk, Virginity.

ZIM was founded in 1945 by the Jewish Agency – Israel’s per-independence de facto government – and its national labor federation, the Histadrut. Its first ships were used in the clandestine immigration of Jews to Israel in the years between World War II and Israel’s Independence in 1948.

Throughout the 1950s and 1960, Zim expanded its fleet of cargo vessels and made a brief foray into passenger shipping which failed.

The company was a government owned concern until it was privatized in 2004. That year Zim was bought by Sammy and Yuli Ofer’s Israel Corporation for only about $100 million (Now owned by Sammy’s son, Idan Ofer). The low price was widely criticized in Israel.

Several plans over the years to take the company public were aborted due to financial problems.

Rafi Danieli has been Zim’s CEO since March 2009 and has been with the company for 31 years. He has also been its chief financial officer for the past twelve years.

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