Thursday, September 10, 2009

Zim cash injection may run into problems

From Globes online

On October 14, an Israel Corp. shareholders’ meeting will be held to approve a $250 million injection into Zim. This cash injection is a vital condition for executing the debt arrangement.

Most of Zim’s creditors (banks, shipyards, and ship lessors) have agreed to a postponement of payments due to them in return for higher interest rates. Sources at Israel Corp. said that the fact that these creditors were prepared to reschedule debts rather than exercise liens indicated their faith in the company’s future. A sensitive issue in the debt arrangement is Zim’s debt to shipyards privately owned by the Ofer family, which controls Israel Corp., that have sold and leased ships to Zim.


Some Zim bondholders criticized Israel Corp.’s announcement. “Under the arrangement, the bondholders will remain last in the queue, and will receive the debt only in another seven years, while the parties at interest will receive their money before that. The state ought to intervene,” one investment institution said. “The Ofer family has shown contempt for the bondholders. They published principles of a debt arrangement with the bondholders today, even though we have still not reached agreement.”

The representative of another institution said, “The Ofer brothers should take on some of the debt by injecting some of the cash they have received from Zim in the past, and this money should be for the benefit of the bondholders.”

In response to the criticism, Zim said, “Negotiations are taking place with the bondholders’ representatives in a businesslike and constructive atmosphere. Zim has not published any terms of the final agreement, which has yet to be reached. The only two principles that have been published is that Zim is not seeking forgiveness of debt, and that it is asking the bondholders to reschedule the debt.”

click here for link to complete article

No comments: