Zim rescued from collapse with $350m lifeline
Someone e-mailed me recently, asking what basis I had for saying certain shipping companies are in danger of collapsing.
The truth of the matter is all container carriers are losing money. The big question is, how much cash is available to the company to weather this downturn, and, are the owners willing to use their cash resources to keep a company running.
The shipping business has long business cycles, and it generally comes down to "deep pockets". According to this report, Zim will have a negative cash from of $1 Billion until 2013. That's a lot of money.
From Lloyd's List
Janet Porter - Monday 3 August 2009
ISRAELI container line Zim has been hauled back from the brink of collapse by its parent company as an emergency restructuring plan is put together.
Israel Corp has asked shareholders to approve a $350m loan for Zim Integrated Shipping Services, in which it has a 99% stake.
The money, which would be paid in instalments and comes on top of $100m already provided, “is required and essential to the continuation of Zim’s operations,” Israel Corp said in a filing to the Tel Aviv stock exchange.
Zim estimates that it will have a negative cash flow of around $1bn between now and 2013, and is engaged in negotiations with financial creditors to reschedule debts, and to defer the repayment of principal.
In a move reminiscent of the deal struck by Chile’s CSAV, Zim is also in discussion with shipowners about reduced charter rates for a number of years in exchange for convertible notes.
An understanding has already been reached with shipowners that are related to Israel Corp to reduce charter fees by $150m over the next few years, also in exchange for other paper securities.
Israel Corp has close links with members of the Ofer family which has extensive shipping interests. Millenium Investments, which holds 47% of Israel Corp stock, is in 20% owned by Ofer Investment Group. This company also owns 2.9% of Israel Corp directly,
The statement, issued in Hebrew at the weekend and in English a day later, also discloses that Zim has reached “understandings and integrated arrangements” with shipyards about vessels on order, including delivery delays and new financing arrangements. This includes the sum of $155m to finance payment of the outstanding amount due on vessels under construction.
Zim has already received $129m of that money in order to take delivery of two ships last month, the 8,400 teu Zim Los Angeles and 10,000 teu Zim Djibouti.
Also agreed is deferment on the receipt of 14 ships due for completion over the next two to three years. The orderbook includes eight 12,600 teu ships costing $170 each, plus another seven 10,000 teu vessels.
An order for a series of six 1,700 teu ships has already been cancelled. The total value of payments whose dates have ben changed or deferred comes to around $1.5bn.
The $350m that Israel Corp is proposing to lend Zim comes on top of $100m that it as already loaned to the line that lost $119m in the first three months of the year. Second quarter results have not yet been published, but the container trades showed no sign of recovery in that period and only now are seeing some stability in freight rates.
The $100m that Zim has received from its parent company was part of $150m worth of support that Israel Corp said last year it would be willing to provide in 2009, if circumstances required.