Israel Corporation (TASE: ILCO) unit Zim Integrated Shipping Services Ltd. will write off $72 million from its 2013 financial report after cancelling ship purchase deals from 2007 with Samsung and Hyundai shipyards.
Zim paid a $68 million deposit for the four ships and the shipyards will be entitled to keep this sum in full. Zim will not need to make any additional payments to the shipyard. Had construction of the ships begun then Zim would have been required to pay $1.5 billion even though the price of ships has dropped an estimated 40% since 2007. The price of each the ships that Zim agreed to purchase in 2007 was $170 million, while, today, similar ships, with more advanced technology, may be purchased for $100 million.
The cancellation of the order was carried out as part of the company’s five-year business plan, a demand set by Zim’s creditor banks supporting the company’s debt settlement. Zim is not expected to see any drop in value on its financial reports (beyond those that have already been seen) as a result of the cancellation of these deals.
Zim recently reached a debt settlement agreement with most of its creditors (shipping companies, foreign banks and Israeli bondholders) in which it will write off 50% of its debts worth $3 billion. Israel Corp will write off a $225 million loan to Zim, inject a further $200 million and dilute its holding to 32%. The bondholders will receive a 20% stake and the other creditors 48%. The settlement has yet to be approved by the Israel Corp shareholders.
Published by Globes [online], Israel business news - www.globes-online.com - on February 6, 2014
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