News / New court deal with government means Zim can complete financial restructure

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Israel Corporation has reached a compromise with the government over the stock transfer restrictions of the state’s “golden share” holding in Zim, allowing its troubled ocean carrier subsidiary to finish its restructuring.

But it is a far from ideal result for Israel Corp, which pushed hard for the government to surrender the blocking vote it holds in Zim – dating back to when the carrier was state-owned – which, according to Zim president and chief executive Rafi Danieli, “needs to be done away with”.

The transfer restriction is just one of the conditions of the state’s special share, which means Zim can be ordered to transport food and essential equipment to the country’s ports in times of war or economic hardship by a so-called “iron fleet” of 11 ships contracted to the Ministry of Defence.

The deal was thrashed out in the Supreme Court on Monday, after the government appealed the decision of the Haifa District Court to allow Israel Corp to sell its reduced stake in Zim without state approval.

The government claimed the Haifa court was “misled” by Zim’s lawyers on the extent of the severity of the carrier’s financial situation, convincing the judge to rule that unless golden share negotiations were expedited the company was “heading off a precipice”.

Haifa District Court judge Adi Zarankan said that in the case of bankruptcy, the state’s golden share would be useless and thus ruled in favour of Israel Corp.

Zim chief executive Rafi Danieli

Under the terms of the Supreme Court settlement, the Haifa Court decision will be set aside and replaced by the condition that if Israel Corp seeks to sell more than 24% and up to 35% of the ‘new’ Zim, and the state objects, then the parties must return to the court to resolve the dispute.

Under the terms of Zim’s debt restructure, Israel Corp will waive loans of $225m, inject a further $200m and see its stake in the company reduce to 32% from the current 99.7%. The company will also provide a badly needed liquidity line of $50m to the troubled carrier.

The creditors of the financially-stressed carrier will swap $1.4bn of debt for equity in the restructured company, and have been waiting patiently while the golden share argument raged.

Mr Danieli thanked creditors for their support during the 18 months of debt negotiations, and reassured them that Zim would now “focus on profitable trades” and “adjust lines accordingly”.

He added that Zim “will be able to face the many challenges of the global shipping market” and also thanked the carrier’s customers around the world who, “supported us during the difficult period and had confidence in the company’s ability to recover”.

Mr Danieli is reported to want to stand down once the carrier’s $3bn debt mountain restructure is complete.

The carrier faces an uphill battle to return to the black after posting a net loss of $530m in 2013 and haemorrhaging a further $62m in the first quarter of this year.