Israel Corp has reached a compromise with its institutional shareholders over a cash injection into debt-laden shipping subsidiary Zim. The vote on the new proposal is due to take place tomorrow. Under this proposal, $150 million that Zim owes companies privately held by the Ofer family, which controls Israel Corp., will be repaid to Israel Corp. instead of to those companies. This debt has been deferred for at least four years, and is expected to be repaid in full by 2020. In any event, it is subordinate to Zim’s debt to its bondholders.
The arrangement includes a new safety net. Whereas under the original proposal, Israel Corp. was to have injected $75 million into Zim and the Ofer family $25 million, under the new proposal, each will inject $50 million. Millennium Investments, the vehicle that controls Israel Corp., undertakes to make available to Zim a safety net of $50 million instead of $25 million, and the Ofer family companies connected to Zim, which cut ship leasing payments due from Zim by $150 million and were due to receive the payments later, will forego the debt and transfer the right to it to Israel Corp.
Among the private shareholders in Israel Corp. there is a majority for the proposal, but they are a minority voice. The institutions have been allowed a delay until tomorrow afternoon (Wednesday). It is believed that the proposal will win a majority. Earlier today, the institutions taking part in the vote expressed anger at Israel Corp.’s insistence on approval of the arrangement today, without waiting for them to obtain approval from their investment committees.
Published by Globes [online], Israel business news - www.globes-online.com - on November 3, 2009
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