Standard & Poor's Maalot Ltd. today slashed its bond ratings for Israel Corporation's (TASE: ILCO) wholly-owned subsidiary Zim Integrated Shipping Services Ltd. from "B" to "CC", with a "Negative" outlook. Zim raised NIS 1.3 billion in bonds in 2005-06.
Until a few months ago, Maalot gave Zim's bonds an "A" rating. Since the company announced that it was seeking a bond settlement, Maalot has made several downgrades for the bonds. Maalot added that the latest downgrade might be the last, and that it could go down to "D" for default.
Maalot is pessimistic about the bargaining position of Zim's bondholders. "In view of the bondholders' inferior position in a bond settlement, we believe that they are limited in their ability to obtain a better alternative than accepting the settlement proposed by the company," it states.
Despite the downgrade, Zim's bondholders do not appear to have an excuse to demand immediate repayment. The bonds' terms do not state that a downgrade is reason for repayment, in contrast to other cases of similar downgrades, particularly for bonds of private companies such as Zim.
Maalot adds that if no bond settlement is approved, Zim could turn to the courts. "If no settlement is reached with the creditors, the most likely alternative is a court-ordered debt settlement," says Maalot. Maalot does not believe that this is a good option, since "achieving a comprehensive settlement is essential for avoiding a court-ordered debt settlement, which is liable to include massive write-offs."
Published by Globes [online], Israel business news - www.globes-online.com - on September 15, 2009
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