The story of Zim Integrated Shipping Services Ltd., once a proud Israeli shipping company, but now a shipping company after two huge debt settlements, wiping out billions, mainly to foreign shipping companies and banks, is a sad tale, but most of all an unresolved story. How did Zim end up in such a state? Yes, everyone knows the story about the shipping industry crisis, the drop in cargo prices, and the megalomaniacal shopping spree for ships, but no one really understands how it is possible to lose $1.8 billion in seven years.
Zim's relations with the Ofer family and its fleet of private shipping companies, even when Zim was a government company, were never clear or transparent enough. Despite the flood of figures in the financial statements of Zim's parent company, Israel Corporation (TASE: ILCO), the relationship between Zim and the Ofer family are shrouded in fog; so complicated, twisted, and overloaded with details, that it is doubtful whether the directors who approved the many deals between the parties understood them, even though hundreds of millions of dollars flowed from one party to the other. Most of the flow was from Zim to the Ofer family's private companies.
Some time ago, "Globes" approached high-tech entrepreneur Dror Dvir, and showed him an amazing picture that raised many questions. Dvir carried out a huge study, discovering more than 300 private foreign companies of the Ofer family, some of which did business with Zim. These were financial transactions - sale-lease-buy - deals with several of the world's shipping companies. It seems that the Ofer family (the private shipping companies are mostly owned by Eyal Ofer, Idan's brother) developed an extraordinary expertise in such deals, otherwise, it is hard to explain these companies' huge profits over the past decade. Hundreds of millions of dollars, not a single year with losses, phenomenal profit margins, and of course… almost zero taxes. It seems that the shipping industry crisis completely passed over the Ofer family's shipping companies, and if they were hit, it merely reduced their profit margins, which nonetheless remained very healthy every year.
It also turns out that, under British law, a private company is not as private as an Israeli private company, is required to file quite detailed financial statements, including a profit and loss statement, balance sheet, and clarifications with the British authorities. (Maybe Israel should adopt this). These companies, which are engaged in a kind of tailoring of financial deals for ships with shipping companies around the world, create a huge glow of profits and dividends on which almost no taxes are paid. Why zero taxes? Because British tax law on shipping deals allows this, another fact that raises questions about taxation around the world, cross-border tax planning, and the tax contribution by the world's rich people and big corporations.
Today, "Globes" has published the full figures, which raise tough questions: How is that the risk from the leasing deals over the years mainly fell on Zim" How did the profits mainly accrue to the Ofer family's private shipping companies (and this is after they waived some of their leasing fees under the debt settlement). How did these mega-deals bring Zim to its present position and where exactly were the directors who brought it to the brink of bankruptcy?
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2014
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