Zim Shipping lost even more money

Things are tough in the container shipping world.   Although everyone said "things will be better by...2012, then 2013, and now I don't know what people are saying.   Other than the losses have widened and the consolidation has finally started.

As I posted earlier today Hapag-Lloyd is buying CSAV.

Yesterday it was announced that Zim will satisfy  it's creditors by offering them shares.  I guess
it's better than nothing, unless they go bankrupt.   Not sure who would be interested in purchasing Zim,
and I question how much longer it's major shareholder, Israel Corp., will accept the continued loses.  Zim has always been supported by the Israeli government, (for reasons probably best left unsaid here), so I doubt the government would want the shipping company to go away.  But who knows.  There is still El Al.

Reuters has a great report..

click here for link    Repeating below for future reference.

Reuters) - Israel Corp, one of Israel's largest holding companies, reported a wider loss in the fourth quarter due to a smaller profit at its chemicals unit and a larger loss at its shipping subsidiary.
Israel Corp said on Thursday it posted a quarterly net loss of $406 million, compared with a $306 million loss a year earlier.
Shipping unit Zim, which has been hurt by tough economic conditions, lost $282 million in the last three months of 2013, wider than $238 million the prior year. Excluding extraordinary expenses, Zim's loss was $113 million.
Zim, the world's 17th largest shipping industry with a 2 percent market share, is in the middle of a financial restructuring process. In January, the firm agreed to a deal with most of its creditors that will see part of its debt swapped for shares and drop Israel Corp's stake to less than one-third.
The deal will slash Zim's overall liabilities to $1-$1.5 billion from about $3 billion.
During the fourth quarter, Zim's revenue fell to $888 million from $981 million, due to a 13 percent decline in average freight rates.

Zim also said it is in advanced negotiations with Israel's government regarding the cancellation of the state's "golden share", while maintaining the government's interests in a way accepted by the defence ministry.
Chemicals unit Israel Chemicals (ICL), the most lucrative holding and the world's sixth-largest potash producer, earned $195 million excluding one-off items, down 21 percent over the previous year.
Israel Corp last week said it was examining the sale of up to 7 percent of ICL. It currently owns 52.3 percent of ICL, which is planning a New York Stock Exchange listing.
Israel Corp is also the parent of chipmaker TowerJazz and Oil Refineries, and holds a stake in Chinese-Israeli carmaker Qoros.
TowerJazz posted a narrower quarterly profit , while the loss at Oil Refineries narrowed.
Qoros, a joint venture between Israel Corp and Chery Automobile Co, posted a quarterly loss of $144 million, compared with $55 million a year earlier
 

Zim agrees to restructuring

Financial Times and others report that Zim (the Israeli container shipping line) has agreed to
debt restructuring.  It's owner (Israel Corp), will hand over 2/3's of Zim to creditors.

The Load Star has an interesting article questioning the future of the carrier.

click here for link

Zim misses deadline to obtain concessions

It's difficult to say how much this will impact Zim's future. If they continue
to lose money, they will need to get cash from somewhere. Obviously the banks who lent them money don't want to make the required adjustments at this time.

From The Journal of Commerce

Zim Integrated Shipping Services failed to meet a Dec. 31, 2011 deadline to obtain concessions or amendments to financial covenants with its creditor banks, the Israeli ocean carrier’s parent said.

As a result, Israel Corp. may have to record Zim’s debt on its balance sheet as short term debt for the fourth quarter of 2011, which in theory means the shipping operation could be liable for repayment immediately rather than over the long term.

The change in the status of the debt is technical but it could affect Israel Corp.’s financial ratios and financial covenants with its own banks, according to Israeli reports.

Zim has no financial covenants that are based on classifying debt as short term or long term, Israel Corp. said in a statement to the Tel Aviv stock exchange.

Zim is believed to owe around $2 billion to mainly foreign banks.

Zim swung to a $66 million net loss in the third quarter of 2011 from a year earlier profit of $37 million swelling losses for the first nine months to $245 million compared with a $42 million loss in the 2010 period.

Israel Corp, which owns more than 99 percent of Zim, injected $50 million into the carrier in November and the controlling Ofer family provided an additional $50 million. Israel Corp contributed $450 million to the carrier’s restructuring in 2009

.

Increased Tonnage Europe/U.S.

I don't really know why carriers would add tonnage at this time, but they are.

This is a press release.

Hamburg Süd and partners to upgrade Transatlantic Service



Hamburg, 19 December. In collaboration with Hamburg Süd and ZIM, Grand Alliance members Hapag-Lloyd, NYK and OOCL have decided to upgrade their tonnage deployed in the Transatlantic Service between Europe and North America East Coast. As from March 2012 instead of four 3,700 TEU vessels, four 5,400 TEU ships are then to come into operation. As hitherto, Hamburg Süd and ZIM will each provide one vessel and Grand Alliance two.



The weekly fixed-day service continues to have the port rotation: Rotterdam – Hamburg – Le Havre – Southampton – New York – Norfolk – Charleston – Rotterdam

Zim needs cash

According to an article in Bloomberg News, Zim will need cash unless the business
improves this year. From what I hear from folks in the industry, that is
not likely to happen.

Lloyd's List has a headline saying Zim is looking for a merger.

In any event, looks like something needs to happen to keep Zim afloat (sorry for the pun!)

From Bloomberg News

Israel Corp.’s Zim Unit Posts Quarterly Loss as Costs Rise

By Shoshanna Solomon - Nov 24, 2011 10:04 AM CT

Israel Corp. (ILCO)’s Zim Integrated Shipping Services Ltd. unit reported a third-quarter loss of $66 million after a year-earlier profit of $37 million as transport prices fell and costs increased.

Shares of Israel Corp., the holding company controlled by the Ofer family, slumped 5 percent to 2,110 shekels, the lowest since September 2009.

“It is still early to evaluate the full impact of Zim on Israel Corp.,” Eran Yunger, an analyst at Midgal Capital Markets in Tel Aviv wrote in an e-mailed report today. Zim “will need an additional injection of cash if there is no change to its business environment,” he wrote.

Container lines’ earnings have slumped this year as fuel prices increase, while rates on Asia-West Coast routes decline. Extra trans-Pacific capacity may prevent the lines from pocketing surcharges that usually make the second half their most profitable period.

Standard & Poor’s Maalot cut Zim to “ilBB-” from “ilBBB- ” with a “negative” outlook today, saying the erosion of transport tariffs and an increasing supply of competing ships will lead to “continued deterioration” at the shipping company.

Israel Corp.’s third-quarter profit rose to $156 million from $106 million a year earlier as revenue increased 21 percent to $3.08 billion.

Zim drags down parent company

From Israeli paper Globes(online)

Zim troubles drag Israel Corp. down to loss

Zim's revenue sank nearly 50% to $596 million.

Hillel Koren26 Nov 09 10:07

Israel's largest holding company, Israel Corp. (TASE: ILCO) reported a third quarter net loss of $11 million, compared with profit of $253 million in the corresponding quarter of 2008. The company released its third quarter financial results this morning.

The company's troubled shipping unit, Zim Integrated Shipping Services Ltd., reported a loss attributable to Israel Corp. shareholders of $208 million, compared with a loss of $61 million in the corresponding quarter. Expectations were for Zim's loss to reach $120 million.

click here for link

And from The Journal of Commerce

Zim’s loss helped push parent Israel Corp. into an $11 million third quarter net loss from a year-earlier profit of $253 million.

Israel Corp. shareholders narrowly voted earlier this month for a $450 million capital injection for Zim as well as a $100 million “safety net” as part of a recovery plan for the world’s 17th-largest carrier.

The troubled carrier, which faces a cash flow deficit of $1 billion over the next four years, also will receive more than $500 million in new financing from its banks in 2009-10 to finance the purchase of ships repayable over more than 10 years.

Zim has cut charter payments to ship owners, returned leased ships, trimmed its work force, closed unprofitable services, joined forces with rivals on some routes, and delayed deliveries of new ships as part of the recovery program.

Zim's problem

Zim's main problem is, it needs $1 Billion dollars between 2009 and 2013.

This is what it plans to do, to get the money.

From The Journal of Commerce.

Israel Corp., which is controlled by the Ofer family, plans to inject $60 million into Zim and reduce by $150 million charter payments for 19 container ships owned by family firms.

Israel Corp. plans to inject a total of $350 million into Zim, the world's seventeenth largest ocean carrier.

Zim's recovery plan also involves cancelling and delaying box ship orders, returning vessels when their charters expire and shrinking its network and payroll.

I'm not really sure that's going to get them the billion they need.

The rescue meeting is set for Oct. 28. The other creditors/owners will get their say at that time, I guess.

I don't know why a lot of these plans haven't already been executed, like the shrinking of payroll and network. Plus, they should have already returned chartered tonnage, and should have already reduced the charter hires.

Someone has been asleep at the wheel.

Offer to Zim bondholders

From Israeli newspaper Globes

Sep 09 16:57

The shipping company has deferred $2 billion in payments to shipbuilders.

Israel Corporation (TASE: ILCO) told bondholders of wholly-owned subsidiary Zim Integrated Shipping Services Ltd. that it is not asking them to forego part of the debt, but only to delay payments on the bonds. Israel Corp. added that it transferred $100 million to Zim during August, and that it will transfer an additional $250 million as part of a Zim recovery plan, if the bondholders approve the debt settlement next month.

Israel Corp. will include in the Zim recovery plan a $150 million discount over four years on the leasing fees that Zim pays Ofer Shipping Holdings Ltd.

I don't know what these payments from Zim to Ofer are for, but I suspect it's a better deal for Ofer than for Zim.

click here for link to article

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

Zim fights back

The Israel Securities Authority yesterday disallowed a vote by a minority shareholder, and today Zim has contacted an attorney to try and get something done to change this.

They desperately need money to avoid bankruptcy.

From Lloyd's List

In a statement released today, Zim said: “It is important to note that Israel Corp’s position differs from the Israel Securities Authority, it believes that the required majority has in fact been achieved and the Board is therefore presently seeking legal council to consider its options.”

The statement goes on to say, “if the controlling shareholders and Bank Leumi votes had been counted, over 90% of the votes would be in favor of the fund injection.”

Zim chief executive Rafi Danieli said: “With the support of Israel Corp, ZIM is continuing with its efforts to formulate a long-term, comprehensive financial restructuring plan for the company.”

Sources in Israel said that a legal dispute with regulators would not typically end up in the court system, but would be solved through direct negotiations. However, analysts noted that Zim’s survival is at risk if the dispute persists.
....................
Virtually no one believes that Zim can survive without infusion from its parent company. Zim employs over 7,000 people and is considered by some to be the national symbol of Israeli shipping.

click here for link

Update-Zim funding blocked

From Lloyd's List

Zim rocked as $100m rescue funding plan hits buffers

Tom Leander - Tuesday 25 August 2009
A VOTE on $100m in rescue funding for troubled Israeli container line Zim Integrated Shipping Services was rejected by the Israel Securities Authority on the grounds that Bank Leumi, which was in favour of the funding, was not eligible to vote.

The Israeli securities authority said there were not enough remaining minority shareholders to pass the vote.

Bank Leumi is a key minority shareholder in Zim’s owner, Israel Corp.

Zim could not be reached for comment at press time.

The drama affecting Zim has dragged on for five days since the Israel SEC ruled previously that the bank was not eligible to vote for bailout package because of its position as a lender to Zim.

The bank is the largest minority shareholder of Israel Corp, holding 18% of the stock, and has loans of $10m outstanding to the container line.
But the bank voted anyway, leading to a debate by remaining minority holders over who would be allowed to decide the vote. A full 54.2% of Israel Corp is owned by vehicles owned by the Ofer family.

The capital injection was part of a broader plan to pump $350m into Zim, a victim of the global downturn in the container market. At least one-third of minority voters are required to vote in favour for the $100m to be released.

Analysts have repeatedly expressed frustration over the lack of information offered by Israel Corp over the Zim restructuring plan, which was announced on August 2.

“I don’t think [Israel Corp] can stick with this situation — not saying anything — for much longer,” said Yoav Burgan, an analyst with Leader, an investment house in Tel Aviv. “It doesn’t make sense.”

At the time, Israel Corp announced a deal that would allow deferrals on ships that Zim had on order and, in some cases, help with financing.

It also outlined a plan to offer convertible shares to shipowners doing business with Zim in an exchange in reduction of charter rates, but the rate of conversion for the shares was not included — making the true value of the offer hard to glean.

Zim rescued for now

The headline from Lloyd's List reads

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.

Zim considered a credit risk

I guess that's what this headline means...

From Lloyd's List (click here)

TRADE credit insurers are refusing cover to struggling shipping companies’ fuel suppliers, with boxship line Zim emerging as an initial casualty in this latest turn in the economic crash.

I don't know much about Zim. I thought it was owned by the Israeli Government, but apparently by 2004 it was completely privatized.

I knew someone who knew someone (talk about here say) who worked there. It was assumed Zim was a cover for Mossad operations. I have no idea if this was true.

Anyway, the Israeli government no longer has any investment, and it appears that Zim is in some financial trouble.

I think this is one of the carriers which won't survive in this downturn.

Sorry to say.