Standard & Poor's Maalot Ltd. has cut its rating for three bonds of Zim Integrated Shipping Services Ltd., controlled by Israel Corporation (TASE: ILCO), by one grade from "B" to "CCC", in view of the company's business plan now being drawn up with the creditor banks. Maalot reiterated its "Negative" outlook, implying that a further downgrade is possible.
Zim owes $2.69 billion, including $1.42 billion to the banks, $875 million to shipyards, and $391 million to bondholders. The bond debt, issued to investment institutions in 2005-06, is unsecured
Last week, the bondholders accepted Zim's proposal that they should forego their right to call in the debt, in view of the pending business plan being drawn up with the banks.
However, analysts believe that there is a strong probability that, in the short term, Zim will restructure its bank debt, which is liable to be considered as a "distressed exchange offer"; a debt settlement, or rescheduling of the company's commitments under pressure - a situation that could result in Zim becoming insolvent.
S&P Maalot said, "The company will find it very difficult to meet its financial covenants in 2014, and it will not be able to meet its commitments in the second half of that year."
Published by Globes [online], Israel business news - www.globes-online.com - on May 6, 2013
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