Zim rescue funding on the rocks
Israeli liner carrier Zim is facing an uncertain future after a shareholders vote failed to yield approval for a $100 million cash infusion, amidst concern from Israel's securities regulators about shareholders with personal interest in the deal.
Management for the line, wholly owned by Israel Corp., is seeking the $100 million infusion as part of a $350 million rescue package proposed by Israel Corp. Zim faces a cash flow deficit of $1 billion through 2013, Israel Corp. estimates, and the rescue funding is seen as a way to guide the carrier through the difficult short term so it can survive when container shipping rebounds.
Zim has been scalded by historically low ocean freight rates and also has a significant order book of large vessels it is working through over the next few years. This summer it took delivery of the first two of those large vessels, but it has been actively trying to negotiate with shipbuilders in Asia to delay or cancel other orders.
The $100 million infusion, initially thought to have been approved by Israel Corp.’s minority shareholders, was surrounded by uncertainty over the weekend. Israel's securities regulatory agency said the Bank of Leumi, an 18 percent shareholder in Israel Corp., should not be allowed to vote on the Zim rescue package because it has a $10 million outstanding loan to Zim.
But the bank participated in the vote anyway. Israel Corp. said Tuesday that 79.3 percent of shareholders participated in the vote and that of those who voted, 92.3 percent approved the $100 million cash injection. Israeli law requires one-third of minority shareholders to approve the deal, and the securities regulatory agency said the Bank of Leumi votes would not count as part of the necessary one-third because of its lending interests with Zim.
Israel Corp. is 54 percent owned by various subsidiaries of the Ofer Group, which is also the owner of more than 20 percent of Zim's vessels. The group, as majority shareholders, was not part of the minority shareholder vote.
“It was still required to examine whether there is a 'supportive third' among the voters not having personal interest,' Israel Corp.'s investor relations department said Tuesday. 'The Israeli Securities Authority is in the opinion that the majority of voters who voted for approving the resolution have personal interest, and their support does not constitute the supportive third as required (under Israeli law). The opinion of the company is different, and it reserves all its rights and arguments in connection with the results of the vote in the Special General Meeting with respect to (the injection of $100 million to Zim) and is considering its future steps in an attempt to consummate the restructuring plan of Zim.'
Zim issued its own separate statement Wednesday, pointing out that the line is not asking for help from the Israeli government.
'It is important to note that Israel Corp.’s position differs from the Israel Securities Authority,' Zim said. 'It believes that the required majority has in fact been achieved and the board is therefore presently seeking legal council to consider its options.
'Zim, in conjunction with Israel Corp., has formulated a long-term plan aimed at financial stabilization so that the company can prosper when the liner industry recovers from the downturn. Additional measures such as changing and modifying its lines, reducing the number of ships it operates, postponing deliveries of new ships and implementing cost-saving measures have already been implemented.'
Israel Corp. also said it has been negotiating with ship owners from which Zim charters vessels about an equity-for-charter-rate-reduction plan.
“With the support of Israel Corp., Zim is continuing with its efforts to formulate a long-term, comprehensive financial restructuring plan for the company,' said Rafi Danieli, Zim president and chief executive officer.