By sharply reducing its debt and continuing to reduce expenses, container carrier Zim believes it will be able to stay on course, even if the container shipping industry continues to experience stormy economic seas.
The company believes it has made considerable progress by going through a massive deleveraging, reducing both on and off balance sheet liabilities that totaled about $7.5 billion in 2009 to about $3 billion today.
The company is planning to halve those liabilities to about $1.5 billion, through a reorganization plan
that was revealed by its parent Israel Corp. on Thursday.
While the company has been able to garner support from stakeholders and creditors, it still needs to be formally approved by both creditors and by the Israeli government, which owns a so-called “golden share” in the company. The company is obligated to have a certain number of ships under the Israel flag, crewed by Israelis, to cover the strategic needs of the country.
Zim has also cut expenses, reducing its global headcount by about 500 to around 5,000. In Israel itself, where the company has about 1,000 employees — 200 at sea and 800 ashore — it has reached agreement with union leaders to eliminate 100 positions. Fifty of those workers have already left, and the company is now aiming to increase the reduction by another 50 so that it will eventually it will have about 700 onshore workers in Israel.
Stakeholders are supporting Zim's plan, sources say, because it is not predicated on a huge recovery in market or economic climate, but instead is mainly dependent on efficiency steps the company will take. Zim was able to convince its creditors who monitor it on a regular, even daily, basis, that it was worth supporting.
Zim has been able to reduce liabilities by pushing back commitments; restructuring amortization schedules; renegotiating charters at lower rates; and postponing delivery dates for new ships and, hence, the downpayments that were associated with those orders. As the company paid commitments under long term charters, that also effectively reduced liabilities as time passed. And it paid a substantial amount of principal to various creditors.
The company’s orderbook, which stood at 13 in 2009, was cut to four vessels last year. Each vessel had a price tag of $170 million. Company officials note that redesigned, more fuel-efficient versions of the same ships can be ordered today for about $100 million, so that by cancelling the orders, it was able to release itself from a burdensome orderbook.
Just hours before Israel Corp. filed the term sheet with regulators, Lea Bogatch-Genossar, Zim’s president for the Americas, Canada & Caribbean, was feted Wednesday evening as the “2014 Person of the Year” by the New York New Jersey Foreign Freight Forwarders and Brokers Association.
Addressing the the group, she called on the industry "to be responsible and save our industry."
She continued, "Yes, competition is good, but sometimes you have to think about the benefit of all the industry. If we have a limited number of shipping lines, it will not be good for anyone."