Zim's rating slipped from 'A' to 'CC' — one level above bankruptcy — over the last two years as it struggled with declining freight rates and volume and mounting debt related to purchases of new containerships.
The line was able to negotiate a debt restructuring of more than $1 billion in the second half of 2009 and received cash injections from shareholders to stave off a short-term cash shortfall. Part of Zim's $3 billion debt was owed to bondholders, but the repayment of that debt has been rescheduled to allow Zim's business to recover.
With freight rates rising, especially on the key Asia/Europe lane, Zim's precarious position has become less so, leading Maalot (which was acquired by S&P in 2007) to upgrade the line's rating by six grades. A 'B' grade is considered stable.
Maalot indicated that if Zim meets its financial restructuring targets and improves liquidity, the rating could improve further.
'The upgrade is a significant step in the stabilization of Zim,' said Alon Raveh, Zim's chief financial officer. 'We're now focused on ensuring the continued improvement on our commercial and financial positioning. The upgraded 'B' stable rating for Zim bonds is an expression of confidence in Zim's financial restructuring plan, and strengthens the central message towards the bond holders, which is that the debt will be paid in full, and the only change is the agreed postponement of payment timing, for which the bond holders were compensated.'
