Shareholders to vote on Zim debt settlement

Israel Corp is setting up an independent committee to advise and recommend on the proposed debt settlement.

Sources inform ''Globes'' that, in a few days, Israel Corporation (TASE: ILCO), controlled by Idan Ofer, will announce the convening of a shareholders meeting to approve the debt settlement at wholly-owned subsidiary, Zim Integrated Shipping Services Ltd.. Israel Corp. has also decided to set up a four-member independent committee of external directors and directors unaffiliated with the controlling shareholders, which will hire legal counsel and a financial consultant to review and recommend the proposed debt settlement.

The memorandum of understanding that is the basis for Zim's debt settlement with most of its creditors includes a 50% write-off of the company's $3 billion debt. Israel Corp will write off $225 million debt of Zim's debt to it, inject $200 million into the company, and dilute its holding to 32%. Zim's bondholders will receive 20% of the company, and other creditors (excluding Ofer and his partner Udi Angel) will receive 48%.

Israel Corp.'s capital injection requires approval of the company's minority shareholders, under Article 16 of the Companies Law, because this is a parties at interest deal. Zim's first debt settlement, in 2009, also involved such a vote, and the required 50% majority was only achieved after massive efforts to persuade the minority shareholders by Israel Corp. and Zim.

Israel Corp.'s largest minority shareholder, Bank Leumi (TASE: LUMI), with an 18% stake, was disqualified from voting in that vote at the order of the Israel Securities Authority because it is also a creditor of Zim, and it may be disqualified this time round, too.

Sources close to the matter were optimistic today that the necessary majority would be won. They say that the present debt settlement, unlike the previous one in which Zim's debts were rescheduled over several years, includes a debt write-off that will help the company implement its business plan.

At least two months will probably pass until the debt settlement is approved, given that 35 days notice must be given for a shareholders meeting. Zim must also take care of other contracts and legal permits, including with regard to the Israeli government's golden share in the company. Zim is in talks with the Ministry of Defense and the Israeli Corporations Authority, and the government will apparently waive its golden share in exchange for contracts with the company.

Zim's management is preparing a road show to persuade Israel Corp.'s minority shareholders to vote in favor of the debt settlement. The company is simultaneously working on its five-year business plan, which is a condition for the banks' support of the debt settlement.

Published by Globes [online], Israel business news - - on January 27, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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