Zim bondholders won't call in debt

Zim $391 million bond debt is 14.5% of its total $2.69 billion debt.

Sources inform ''Globes'' that the Zim Integrated Shipping Services Ltd. bondholders representative will waive its right to call in the company's debt, after the parties reached agreement giving the bondholders flexibility to exercise their right to demand repayment under certain circumstances. The wholly-owned Israel Corporation (TASE: ILCO) subsidiary will shortly publish a new waiver stating that any meeting with its creditor banks will constitute cause for the bondholders to demand immediate repayment of the company's debt under the trustee's note.

The agreement was reached after the bondholders representatives - Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), and Amitim Senior Pension Funds (the nationalized senior pension funds) - called for a general bondholders meeting on Tuesday. The call was made in response to Zim's demand for the bondholders to forego their right to call in the company's $391 million bond debt.

Sources close to the bondholders representative told "Globes" that the exhausting negotiations since mid-March were intended to minimize the bondholders' lack of flexibility. "We reached an agreement which both parties can live with and function under," said a source. As a result, Tuesday's bondholders meeting may be postponed.

In the talks between the Zim's management, Israel Corp. CEO Nir Gilad, and the bondholders, they demanded that Israel Corp. provide capital injections as a safety net for Zim. Gilad replied that there was little chance of this, because of Amendment 16 of the Companies Law.

Under this amendment, a party at interest deal, such as the one requested by Zim's bondholders, would require a majority vote by Israel-Corp's minority shareholders who were not also Zim bondholders. Gilad said that the shareholders had no interest in favoring such a deal. Zim's bondholders representative upped the ante, saying that if Israel Corp did not agree to a capital injection, its controlling shareholder, the Ofer family should do so through Ofer Holdings Group.

Although large, Zim's bond debt accounts for just 14.5% of its total debt of $2.69 billion. The bond debt, issued to investment institutions in 2005-06, carries no collateral, leaving the bondholders with no means of action except to demand immediate repayment. They have the right to recall the debt if there is any change in Zim's debt structure. Zim is drawing up a new business plan with its creditor banks to restructure its debt. The company must submit the plan by April 30.

Published by Globes [online], Israel business news - www.globes-online.com - on April 21, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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