Considerations for Investment Financing Sept. 2011 Allon Raveh, CPA (Adv.) CFO, Zim Integrated Shipping Services Ltd.
Overview Established 1945 Among the world s top 20 largest container shipping companies Fleet capacity 360,000 TEU, 100 ships Volume carried (2010) approx. 2.2m TEU Owned by Israel Corp.; reporting similar to a public company Total debt $2.6 bil. Business Environment Sector suffered a severe negative cycle in 2009 In 2009 the Company successfully completed a comprehensive financial restructuring plan New strategic plan currently being executed: Strategic refocusing of shipping lines network Cost cutting and efficiency measures Increasing marketing and sales-force effectiveness 2010: Market recovered sharply; volumes, freight rates and utilization increased dramatically H1 2011: Weakness in market conditions mainly due to over-supply and high oil prices Summary Financial Results $ Millions FY 2010 Revenue 3,717 Operating profit 223 Net Profit 54 Operating Cash flow 368 EBITDA 414 Shareholders Equity 735 FY 2009 2,449 (674) (432) (413) (517) 502 2
Global container vessel orderbook 3
5
6 Zim s Capital Structure Shareholders G Bondholders ZIM Guarantee Other Financing A Owned Equipment Chartered Fleet SPVs SPVs Security Hire Rate Banks Shipowners Owned Fleet Ordered Fleet Vessels Shipyards A: Unsecured loans/bonds B: D: Secured loans C: Charter counterparties E: New vessels financing F: Shipyards G: Shareholders B C Guarantee D Banks Security E Security Banks Export credit agencies Security F
Annual Senior Loan Volume (Europe) 180B 360 160B 320 140B 280 120B 240 100B 200 80B 160 60B 40B 20B Deal Count: 97 120 80 40 0B 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1Q 2Q 3Q 4Q Deal Count* * Deal Count counts First and Second Lien portions of a single transaction as one event; Deal Count also excludes any amendments. LCD updates all current year volume as necessary to reflect the latest bank meeting information 7 0
Deal Purpose Diversification (based on volume) 100% 80% 60% 40% 20% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1H11 Acquisition Related Recapitalization Refinancing Other 1H11 Observations: 97 deals with 27.8B equivalent volume 8
Total Transaction Structure 100% 80% 60% 40% 20% 0% 2003 2004 2005 2006 2007 2008 2009 2010 1H11 Sr Only Sr + 2nd Lien Sr + Mezz Sr + 2nd Lien + Mezz Sr + HY Bond This chart represents the percentage of deals which have senior facilities only, vs. senior first lien and second lien, etc based upon transaction count. For example, during 2006, 26.01% of all deals had Senior, 2 nd Lien and Mezz structure. 9
Distribution of Spreads Based Upon Facilities 100% 75% 50% 25% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1H11 Less than L+200 E+200-249 E+250-299 E+300 or Higher Based only upon First Lien tranches. Shares are based upon facility count. 10
Spreads 11
Spread per Unit of Leverage (SPL)*: Europe & U.S. 180 bps 160 bps 140 bps 120 bps 100 bps 80 bps 60 bps 40 bps 20 bps 0 bps 4Q98 2Q99 4Q99 2Q00 4Q00 2Q01 4Q01 2Q02 4Q02 2Q03 Europe 4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 Based upon weighted average institutional spread versus average pro forma total debt leverage ratios. US leverage reflects ratios for Large Corporate Transaction (minimum EBITDA of $50M). 4Q06 U.S. 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 12 2Q11
Annual Pro Forma Debt/EBITDA Ratios 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1H11 First Lien/EBITDA Second Lien/EBITDA Other Debt/EBITDA Excludes Broadcasting, Cable & Telecom loans prior to 2002. 13
Distribution of Deals by Pro Forma Debt/EBITDA Levels 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1H11 Less than 3.0x 3.0x to 3.9x 4.0x to 4.9x 5.0x to 5.9x 6.0x or Higher Based upon senior transaction count. Includes only transactions with credit statistics available. Excludes Broadcasting, Cable & Telecom loans prior to 2002. 14
Average Commitment Fee: Europe & U.S. 175 bp 150 bp 125 bp 100 bp 75 bp 50 bp 25 bp bp 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1H11 US Europe Excludes Broadcasting, Cable & Telecom loans prior to 2002. 15
Average Pro Rata Upfront Fee Based on Commitment Amount as a Percent of Total Loan Amount 250 bp 200 bp 150 bp 100 bp 50 bp bp NA NA NA NA NA Less than 5% 5%-9.99% 10% or Higher 2003 2004 2005 2006 2007 2008 2009 2010 LTM 30/06/11 16
Primary Market by Broad Investor Type 100% 75% 50% 25% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LTM 30/06/2011 NA European Banks Non-European Banks Institutional Investors Securities Firms 17
European Leveraged Finance Volume Share of Total Volume 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Leveraged Loans Mezzanine HY Bonds Note: HY volume excludes PIK instruments & short-term bonds; reflects corporate bonds only In case of a global issue, the portion allocated to European HY investors is counted (if unknown, the entire global issue is counted) 18
European High Yield Analysis 18B 15B 12B 9B 6B 3B 0B 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 LBO HY Volume Non-LBO HY Volume Note: HY volume excludes PIK instruments & short-term bonds; reflects corporate bonds only In case of a global issue, the portion allocated to European HY investors is counted (if unknown, the entire global issue is counted) 19
European HY: Primary Yield by Rating 14% 12% 12.4% 10% 9.7% 9.4% 8.4% 10.0% 8.9% 9.3% 8.9% 8.9% 9.9% 8.4% 8.6% 8% 7.1% 7.0% 7.4% 6.7% 6.8% 6.7% 6% 4% 2% 0% 1H09 2H09 2009 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 B BB 20
Global Equity Capital markets (annual volumes) Global Equity Capital Market Activity Annual volumes USD Bn 500 400 300 200 397 363 404 346 160 309 374 339 380 393 456 212 230 188 164 100 0 2007 2008 2009 2010 2011 YTD America Asia Pacific EMEA Source: Dealogic 21
Global Stock Exchanges Exchange Overview Venue NYSE London Singapore Hong Kong Key Statistics Number of Companies 2,319 2,913 775 1,463 Combined Market Cap $12,420 bn $3,802 bn $693 bn $2,732 bn % Foreign Listings 22% 20% 40% 2% Key Index DJIA FTSE 100 Index Straits Times Index Hang Seng Index % Change YTD (4.58)% (12.60)% (9.60)% (14.43)% Index P/E 11.86 10.18 7.94 9.15 3m Average Daily Turnover 6,581,094 6,200,492 854,135 3,376,889 Source: WEF, Bloomberg 22
Export finance participation in vessel acquisition financing (total size appx. $600mil) Com. Bank A 5% Com. Bank B 7% Export bank participation imporant for: - ensuring sufficient funds - participation of commercial banks - changes in the facility including restructuring/amendments Export Bank 60% Com. Bank C 7% Com. Bank D 6% Com. Bank E 4% Com. Bank F 3% Com. Bank G 7% 23
Credit insurance in vessel acquisition financing (total size appx. $300mil) com. Bank F 9% Credit insurance important for : - reducing cost of funding - enabling commercial participation - changes in the facility including restructuring/amendments Com. Bank E 9% Com. Bank D 14% Com. Bank A 30% Senior tranche Com. Bank C 19% Com. Bank B 19% Junior tranche 24
Financial Covenant Amendment Terms Average amendment fee offered to lenders Average spread increase offered to lenders 80bp 70bp 60bp 50bp 40bp 62 63 71 66 68 70 76 66 50 54 70 48 200bp 175bp 150bp 125bp 100bp 164 150 105 100 96 103 96 93 144 117 108 30bp 75bp 20bp 50bp 10bp 25bp 0bp 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 0bp 3Q08 NA 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 25
Considerations for investment financing The international high-yield market Asian sources for capital Structure of syndication (# of banks, majority needed for decisions, ability to sell, etc.) Definitions of default and cross-default Refinancing flexibility, break costs Refinancing risk of other facilities Export credit financing Credit insurance Financial covenants Process and cost of amendments 26