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Zim seeks bond payments delay

Zim seeks bond payments delay

Tel Aviv: Israel Corp the parent of troubled Israeli shipping company Zim, said it would call a shareholders' meeting for Oct. 14 to approve a restructuring programme that includes seeking to delay paying the principal on Zim's bonds, writes Reuters.

Israel Corp said on Thursday Zim had been hard hit by a crisis in global trade, which hurt the shipping industry just as Zim was expanding and ordering new ships.

Zim has said it expects a cash flow deficit of $1 billion from 2009-2013 and therefore decided to implement a recovery programme. Zim posted a loss of $186 million in the second quarter.

"The recovery programme is based on the assumption that the problematic situation in the shipping market will continue in 2009 and 2010 and only in 2011 will there begin a gradual recovery in the shipping market," Israel Corp said in a statement.

Zim already has a standstill agreement in place with its creditors by which it only pays interest on its debt, and not the principal, until approval of the restructuring.

As part of the recovery programme, it is seeking to delay payment of the principal for a few years -- until it pays off its secured debt, which Zim said took priority over bondholders, or until there is a sharp decline in its debt level.

During this period, it will pay a certain amount of interest and grant bondholders the right to partake in profits.

Zim, which is already negotiating with representatives of the bondholders, will also offer them the right to convert their bonds into shares.

Israel Corp, which is controlled by the billionaire Ofer family, has said it will inject $60 million into Zim while reducing by $150 million the payment Zim owes for leasing ships owned by the Ofers in exchange for convertible bonds.

The $60 million is part of a plan to infuse $350 million into Zim. Last month a plan to inject $100 million into the company ran into resistance from Israel Corp shareholders who are not considered interested parties.

The Ofer Group owns 55 percent of Israel Corp while Bank Leumi, the country's largest bank, holds 18 percent.

Zim Chief Executive Rafi Danieli said the recovery programme included efficiency measures such as closing unprofitable lines, delay in delivery of new ships, returning leased ships to their owners and a reduction in workers. "The recovery programme is aimed at adjusting the labour force to the level of activity and bringing the company to stability," he said.  [10/09/09]