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ZIM finalized the terms of its financial restructuring arrangements

London - A $3bn restructuring plan including a $1.4bn debt equity conversion with creditors.

London - The substantial debt reduction, along with the injection of new equity as part of the agreement, will give ZIM the basis with which to compete successfully in the global shipping market. The estimated valuation of ‘New ZIM’ following the restructuring is $600-800m. The Company has also reached an understanding with the Israel Ministry of Defense regarding a revised “Golden Share”. Changes in the terms of the “Golden Share” held by the State of Israel, once concluded, will ensure that state vital interests are fully safeguarded, while eliminating provisions that stand in the way of implementing the restructuring agreement.

The company appeals to the relevant government ministers (defense, transportation and treasury) to expedite the final approval of the agreement. The restructuring agreement is essential if ZIM is to have a chance of a successful future. ZIM’s Q1 2014 results are published today against the background of the final stages of the debt restructuring agreement. As part of the agreement, Israel Corporation has agreed to invest additional $200m in new equity, provide the company with a liquidity line of $50m, and forgo $225m of loans. In addition, related companies have agreed to support the company by $180m, by amending charter contracts and forbearing loans. The total support of IC and related parties over recent years has amounted to $1.4bn. Following the restructuring, Israel Corporation will see its stake in ZIM reduced from 100% to 32%.

Last week the Company applied to the Haifa District Court, to convene general meeting of shareholders and holders of stock options, with a view to obtaining judicial approval for the process of ratifying the restructuring agreement at the general assembly of shareholders. This formal procedure is required in order to complete the restructuring arrangement by no later than July 1st. This is also necessary in order to ensure that the company fully complies with the formalities with respect “golden share” and ensures that these are dealt with within the same timeframe.

Earnings before Interest (EBIT) in Q1 2014 were $8 Million loss, reflecting a sharp improvement on the same Quarter in 2013 which saw an operating loss of $47 Million. Q1 EBITDA was $29 Million against a $6 million loss in the same quarter of last year. The volume of TEU containers carried increased by 2% compared with the same quarter of last year, to 617,000 TEU containers. Revenues in Q1 were $867 million compared with $918 million in the same quarter. The decrease in revenues, in spite of an increased volume of containers carried, reflects continued downward pressure on freight rates. The average freight rate per TEU was $1213, a decrease of $69 (5%) compared with Q1 of last year. The company is continuing to seek efficiency savings as part of its strategy of seeking to offset continued weakness in freight rates. Operating cash flow in Q1 was $23 million, an improvement of $50 million compared with the same quarter of last year. The results show continued improvement quarter on quarter and are in line with the industry average.

The company congratulates Mr. Avi Nissenkoren, head of Israel’s Trade Union Organization (Histadrut), who has agreed to lead the negotiations between ZIM employees’ representatives and the management. The collective agreements, created when ZIM was a state-owned company, need to be adjusted to address economic realities and the fiercely competitive environment in which ZIM operates. ZIM CEO Rafi Danieli: “ZIM employees must take their share of responsibility for the company’s future and join in the effort to successfully complete the restructuring. Their cooperation is vital to ensure that the company can benefit from the restructuring and move ahead as the “New ZIM”. We believe that the new structure and strategy will benefit the employees in the long run. With a dramatically improved balance sheet and cost structure, and the support of a committed workforce, the company is poised for a dramatic improvement in profitability over the coming years.”

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