The Israel Corp holding company lost control of Zim Integrated Shipping Services Ltd. The loss of control came into effect under the terms of a bailout agreement negotiated with Zim’s creditors.
The Israel Corp and its creditors signed a debt settlement that includes a NIS 5.25 billion write-off by the creditors - 50% of Zim's $3 billion debt - mostly to foreign banks. Zim's creditors - Israeli and foreign banks, shipyards, and bondholders - will acquire 66% of the company, effectively taking over its board of directors.
Zim's owner, Israel Corporation will inject $200 million into the company, and be left with a one-third stake in it. The bailout agreement is the largest debt reduction ever for an Israeli company. The agreement still needs the approval of the Israel Securities Authority and the shareholders of all the companies involved.
Zim will terminate its current bonds and issue new bond series. Israel Corp. controlling shareholder Idan Ofer and his partner Udi Angel will forego hundreds of millions of dollars that Zim owes their shipping companies.
The debt-for-equity portion of the deal would leave the holding company, controlled by Idan Ofer, with just 30% of Zim, down from 100% today. Zim, the world’s 17th largest shipping company, lost $44 million in the third quarter and had a “going concern” warning in its third quarter results. Last month the Israeli unit of Standard & Poor’s lowered its rating for Zim to “CC” from “CCC”, citing a likelihood of a debt restructuring in the near term.
Rafi Danieli, ZIM CEO, said: “This is a long-term agreement that will grant the company the financial stability to withstand many challenges and changing market conditions. The ability to achieve this agreement is thanks to the comprehensive transformation and cost-saving measures we have implemented in the company, in addition to the service and sales enhancement programs that are already producing results.
Throughout these long negotiations, the company was able to continue to operate in an extremely competitive market, and provide its customers with impeccable service of the highest standard without compromising its commercial results, while further improving its operational performance.
ZIM will continue to work diligently for its customers and to fulfill its business plan. In addition, we are currently acting to create new collaborative ventures in different regions around the world."
