Zim in crisis talks with shipyards and banks over boxship orderbook

Monday, Feb 09, 2009

ZIM’S ambitious growth plans have been brought to an abrupt halt by the collapse of the container shipping trades.

Zim’s parent company is in talks with shipyards to cancel newbuilding orders or delay deliveries, and is holding urgent discussions with banks over $1.4bn of related credit lines.

The Israeli line had been eyeing a return to the world’s top 10 through a large fleet expansion programme, but that is now in tatters as the downturn takes its toll.

Israel Corp, which has a 99% stake in Zim Integrated Shipping Services, said in a statement to the Tel Aviv Stock exchange that various measures were being taken to adjust to deteriorating market conditions, including discussions with shipyards about ships now on order.

The Israeli line gave notice of its intentions to return to the premier league in 2007 when it became one of the smaller lines to order eight 12,600 teu ships, with an option for one more, at a price of $170m apiece.

At the time, the line already had another 12 vessels on order, including eight with nominal capacity of 10,000 teu and four 8,200 teu units.

Reports that Zim was one of many owners trying to renegotiate newbuilding contracts have been circulating in the markets for several weeks.

Brokers say that yards are resisting pressure at the moment, but are expected to make some concessions.

The statement from Ofer Group-controlled Israel Corp said that Zim would also be returning chartered tonnage to owners at the end of hire period, laying up vessels, reorganising services, and conducting a feasibility into the exit from investments in areas associated with liner shipping. Jobs would also be axed.

“Zim is conducting negotiations with shipyards with which Zim has entered into contracts for the construction of ships, where the purpose of such negotiations from Zim’s perspective is to cancel the purchase of a part of the ships which have been ordered or to defer the delivery dates of a part thereof and also to reschedule part of the payments in relation to the purchase of ships by providing credit to Zim for certain sums,” said an English translation of the original Hebrew statement to the stock exchange.

The statement went on to say that, following negotiations between Zim and its financiers, “the majority of the banks have agreed to change or waive compliance”.

To date, 16 ships, accounting for a fifth of fleet capacity, have been laid-up, a figure that is set to rise during the course of the year.

Israel Corp said Zim and banks connected with the provision of financing for ships on order “have reached an understanding” whereby discussions will be held in the next few weeks on $1.4bn of credit related to the acquisitions.

“Based on the results of the contacts between Zim, the shipyards and the banks, it will be possible to assess the influence of the crisis on the financial position of Zim,” Israel Corp said.

The Israeli line is ranked number 15 in the world, according to ci-online, with slot capacity of around 250,000 teu. The existing orderbook would more than double the size of the fleet.

In September, the line was forced to cancel its newly launched Asia-Europe service because of mounting losses.

Source: Lloyds List