Israel Corporation (TASE: ILCO), controlled by Idan Ofer, today quickly announced the completion of the debt arrangement for its Zim Integrated Shipping Services Ltd. subsidiary, despite at least three major open questions.
"The company is pleased to announce that yesterday (Wednesday, E.P.), after all the contingent conditions for implementing the company's part in the deal were fulfilled, the arrangement in Zim has been completed," an announcement to the Tel Aviv Stock Exchange (TASE) read. Shortly afterwards, Zim released a statement to the press saying, "After 18 intensive months, the debt arrangement enabling the company to break even and make a profit in the future has finally been completed." Despite these celebratory statements, however, some questions still remain open.
1. The institutional concerns in the Israel Corporation - the Israel Securities Authority has not yet finished its examination of the propriety of the votes on approval of the arrangement by the institutional concerns with minority stakes in the Israel Corporation, headed by Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), which supported the arrangement. It is believed that the Authority will soon issue an announcement seeking to disqualify Harel's vote, as it did with the votes by Meitav DS Holdings Ltd. (TASE:MTDS), Yellin Lapidot, and a provident fund affiliated with Israel Electric Corporation (IEC) (TASE: ELEC.B22).
2. The foreign banks in the Israel Corporation - the foreign banks holding shares in the Israeli Corporation - BNP, which lent Zim $350 million, for which Zim recently assigned a lien, and Citibank, which lent Zim $88 million - are faced with a conflict of interest, which they refrained from reporting when they voted in favor of the arrangement. Ostensibly, the votes of these banks should be disqualified. Together with disqualification of the votes by the Israeli institutional concerns, approval of the arrangement by the shareholders in Israel Corporation having no disqualifying interests is questionable, since a majority of over 50% is required.
3. The valuation used as a basis for the shareholders' vote - a Supreme Court ruling this week on the status of the state's golden share in Zim vacated the ruling by the District Court. The Supreme Court stated that if a 24-35% block of Zim shares is put up for sale and the state opposes the sale, the parties must return to the Court for a decision on the dispute between them. The valuation obtained by the Israel Corporation from the Trigger-Foresight consultant firm for its Zim shares, which was used as a basis for the shareholders' vote on the arrangement, was calculated under the assumption that the state would have veto rights only on a sale of 35% or more of the Zim shares. The Israel Corporation said, however, that there was no "material difference" between the two rulings, and therefore no need to revalue its shares in Zim.
The Israel Corporation's share of the Zim debt arrangement includes a $200 million injection, an additional $50 million in credit, a $10 million guarantee, and dilution of its holdings in Zim to 32%. The banks, owners of the ships, and bondholders will forego 50% of the $3.4 billion debt, and will receive 68% of the shares.
Published by Globes [online], Israel business news - www.globes-online.com - on July 17, 2014
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