After yesterday's dramatic failure by Israel Corp. (TASE: ILCO) to pass a recovery plan for troubled shipping subsidiary Zim Integrated Shipping Services Ltd., the parent company's board of directors found a creative solution, and will give Zim a capital injection of $60 million, backed by guarantees.
Israel Corp. believes that Zim will face a cash flow shortfall of $1 billion by 2013, and seeks to inject $350 million into the shipper. The proposal did not garner the one-third of votes needed to pass at yesterday's shareholder meeting. However, today there was a striking turnaround, and Israel Corp. reached an understanding with the Israel Securities Authority which apparently clears the way to approve the recovery plan next month.
At a board of directors meeting held today, the board decided to grant Zim immediate aid of $60 million, backed by adequate guarantees by Zim to Israel Corp. The amount is considered part of a $350 million capital injection that Israel Corp. intends to extend to Zim. The amount is in addition to a $40 million funding, also considered part of the recovery plan.
The recovery plan includes not just funding, but also layoffs and a reduction in the number of ships Zim operates.
Yesterday, the Israel Securities Authority ruled not to include the participation of shareholders with a "personal interest" in the company in the vote. Those shareholders include Bank Leumi (TASE: LUMI), because it owns 18% of Israel Corp. as well as being a creditor of Zim.
Today, Israel Corp said that it reached a "breakthrough" with the Securities Authority, and a source close to the matter told "Globes" today that the Securities Authority will not stand in the way of Israel Corp. shareholders the Ofer Brothers in getting approval for the plan next month.
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2009
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