Ofers' Zim Navigates Around Obstacles on Way to Hong Kong Stock Exchange IPO

Zim Integrated Shipping Services, worth an estimated $1 billion is trying to float the company on Hong Kong Stock Exchange; company tried unsuccessfully three years ago.

Zim Integrated Shipping Services is renewing its efforts to launch an initial public offering of its shares on the Hong Kong Stock Exchange. A previous attempt three years ago was unsuccessful due to the onset of the global economic crisis. Implementation of the offering is apparently planned for the end of this year or the first half of 2012.

Zim, controlled by the Ofer group's Israel Corporation, had an estimated value of $1 billion, but this is likely to now be considerably less in light of the company's performance and the current condition of the shipping industry. HKSE rules would require the company to issue at least 25% of its shares.

A Zim ship. The company must float at least 25% of its shares in order to meet the HKSE’s rules.Itzik Ben-Malki

TheMarker has learned that Zim's management has been conducting talks with bondholder representatives to change the conditions agreed upon in a November 2009 settlement so it can complete an update of its prospectus in compliance with HKSE regulations. Specifically, the company wants bondholders to agree to set back the maturity date of its bonds to 2016 in exchange for arranging the terms of options they were given.

In the company's $350 million settlement from November 2009, institutional investors were given two options: converting one-third of the debt into shares at a 15% discount on Zim's valuation in the event of an IPO, and buying 12% of Zim's shares at a $700 million valuation within 24 months following an IPO.

HKSE rules, however, don't allow for the registration of securities at different prices and for offering discounts to one set of investors. Zim, accordingly, is now trying to make mutually agreed changes to the terms of the arrangement with bondholder representatives without deviating from its financial implications. This has led the institutionals into demanding compensation via other improved conditions.

The parties involved are expected to price the value of the option given the institutionals according to various company valuations, and reach an agreement on the amount of compensation, an issue that is still under negotiation. Sitting in for the bondholders are representatives of Harel Insurance & Finance, the Migdal group and Amitim. All sides have an interest that the IPO be carried out and completed successfully: The bondholders will be able to exercise the conversion of their options into shares, while Zim's debt load will be reduced as it raises additional capital to continue its activities.