"If there is no capital injection into Zim within a few days, there may be no further stage of an injection because the patient could die. If no capital injection is approved, there won't be a tomorrow, or any hope for the company," Adv. Pinchas Rubin dramatically told a shareholders meeting of Israel Corporation (TASE: ILCO), the parent company of Zim Integrated Shipping Services Ltd., today. Israel Corp. is seeking shareholders' approval of a $100 million capital injection into the company.
As of web-posting, no decision had been made, because of conflicts of interest for some institutions which are also Zim bondholders. Nevertheless, approval of the capital injection is expected.
Many Israel Corp. shareholders turned up at the meeting at the company headquarters in Tel Aviv. The meeting had to be moved to a larger conference room to accommodate everyone, and it started 45 minutes late. Behind the scenes, it was possible to see Rubin, Israel Corp.'s representative, trying to persuade institutions to vote in favor of the capital injection. "The company believes that the capital injection makes sense. We're in a slump right now, but the boom will come, and this investment in Zim is worthwhile," he said.
Some of the investors present at the meeting hurled accusations at the company's representatives. "Were it not for the procurement plan of 2004, which included the purchase of 12 huge ships, followed by two more huge deals, it wouldn’t be in trouble now," said one participant.
"The company would have been in crisis, irrespective of the procurement plan. The crisis is affecting all companies," replied Zim CFO Alon Raveh.
The investors also had complaints about the transparency of the draft debt arrangement being put together at Zim. “I’m disappointed at the company’s behavior. The deal document is a masterpiece of obfuscation,” one person at the meeting said. “I condemn that statement,” responded Adv. Zvi Ephrat of Gornitzky & Co., who chaired the meeting. “There is full transparency. We are in the process of formulating a recovery plan that will be acceptable to all the creditors. When you are in negotiations, you cannot detail all the numbers. Approval of the capital injection will be good for the shareholders, and also for the Israeli economy. There is a long process here that will take months and is aimed at reviving Zim,” he said.
It is not reasonable that I should set out what I am offering each creditor,” added Israel Corp. CEO Nir Gilad. “I can’t do a complete striptease in the negotiations. We have already suffered damage from disclosure of many details of the negotiations with the creditors,” he said.
Zim has recently encountered financial difficulties as a result of the severe crisis affecting the shipping industry, and a heavy debt burden. Zim owes several billion dollars, the debts arising from a massive expansion program that the company adopted two years ago.
Israel Corp. estimates that Zim will have a cash flow deficit of about $1 billion by 2013. Because of that, the company is in negotiations over a debt arrangement with its various debtors: overseas banks, the shipyards from which it committed to buy the ships, and its bondholders, to whom Zim owes NIS 1.3 billion. In the expected arrangement, Israel Corp. is due to inject $350 million into Zim, of which an initial injection of $100 million was being voted on today.
Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2009
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