Israel Corporation (TASE: ILCO) shareholders today rejected management's request to approve a capital injection into wholly owned subsidiary Zim Integrated Shipping Services Ltd. The rejection came five days after a stormy general shareholders meeting to discuss the proposal. The $100 million capital injection was part of a broader plan for a $350 million capital injection into the company.
Zim has been in severe crisis this year due to the global economic crisis, which has battered the shipping industry. The company is burdened by billions of dollars in debt, part of which it incurred to finance an ambitious expansion plan that included the purchases of new ships. Some of the ships came from Israel Corporation's parent company Ofer Holdings Group through Ofer Shipping Holdings Ltd. Zim currently leases 19 of its 97 ships from Ofer Shipping.
Israel Corp. estimates that Zim will face a cash flow deficit of $1 billion through 2013, and it is therefore in talks on a comprehensive debt restructuring scheme. The restructuring includes a $350 million capital injection into Zim by Israel Corp. The shareholders' rejected the first installment of this injection.
Israel Corp. needed yes votes from at least one third of its minority shareholders to approve the capital injection. However, the fact that some institutional investors that hold Zim bonds as well as Israel Corp shares created a problem. In addition, the Israel Securities Authority criticized the participation of Bank Leumi (TASE: LUMI) in the vote, because it owns 18% of Israel Corp. as well as being a creditor of Zim.
Israel Corp. said in response, "Information published about Israel Corp does not come from the company, and we cannot comment on it because of legal restrictions."
Published by Globes [online], Israel business news - www.globes-online.com - on August 25, 2009
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