News / Zim agrees final restructuring plan, forcing charterers to take a haircut

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Troubled Israeli ocean carrier Zim says it has finalised the terms of its $3bn financial restructuring arrangements with its creditors “following a protracted and complex series of negotiations”.

It also announced that it has reached agreement for amendments in the terms of the “golden share” held by the state of Israel, which had hindered the deal’s progress and prevented the line from joining alliances.

Previously Zim told the media it was in an “advanced stages of negotiation” regarding the cancellation of the share, but now says the “revised” golden share terms will “ensure that national strategic interests are fully safeguarded”.

However, it remains to be seen whether the amendment to the terms, rather than a cancellation of the state’s golden share, will placate the staff protesting at its Haifa headquarters and the seafarers who seized control of the 3,500teu Zim Iberia at Ashdod two weeks ago and temporarily refused to sail on.

Under the terms of the restructure, parent company Israel Corporation will see its stake in Zim reduce from 100% to 32%, and $1.4bn of debt will be  ‘written-off’ and converted into equity – all subject to various shareholder, credit committee and regulatory approvals.

Greek shipowner Danaos Corporation was one supplier caught up in the Zim restructuring and had to write off $19m in its 2013 results, relating to reduced charter hire on six panamax boxships.

The Israeli carrier was paying a reduced hire on the 2008/2009-built ships’ long-term charter, on the understanding that when the carrier’s profitability improved it would pay what was owed.

However, like other creditors, Danaos said it had little option other than to absorb the loss in exchange for equity following the restructure of the line.

The company said the agreement included “a significant reduction in the charter rates payable by Zim for the remaining life of its time charters”, against a receipt of unsecured interest-bearing Zim notes, maturing in nine years.

Meanwhile, as part of the restructure, Israel Corp, already forgoing $225m of loans that formed part of a $1bn support programme for the ailing carrier between 2008 and 2012, will invest $200m of new equity in Zim and provide the container line with a much-needed liquidity line of $50m.

Chief executive Rafi Danieli said: “We are delighted to have reached these agreements after many months of hard work. We are grateful to Israel Corporation for all of its support and additional investment and to all our creditors for their efforts to get us to this point and for the support they have given to the management team and the business plan.

“We are confident that the ‘new Zim’, with its strong balance sheet, is well placed to open a new exciting chapter in its development.”

Last week, Zim announced a new co-operation with the enlarged G6 Alliance on the transpacific tradelane, but, with its indebtedness now substantially reduced and the golden share handcuffs eased, the carrier could now seek to join the G6 as a full member.

Zim lost $530m in 2013, including $161m of extraordinary costs, mostly due to penalties incurred from the shipyard due the cancellation of four 12,600teu newbuilds. It desperately needs the support of an alliance to help it improve its economy of scale positioning in the market.

Indeed, the carrier hemorrhaged $282m in the final three months of last year and, although it has not yet reported its Q1 2014 interims, the current state of the market is hardly promising. In the first three months of the year, reported losses from Zim’s peers have sailed past the $1bn mark.