Zim Integrated Shipping Services unilaterally decided to cut all of its long-term charter hire payments to ship owners by 35 percent for three years starting Sept. 1, according to a statement Tuesday by Danaos Corp., a New York-listed container ship owner that has six ships on charter with the Israeli carrier.
The action comes as carriers across the business and in other modes are announcing new rate increases to push up beaten down revenue.
Danaos, the leading Greek container ship owner, said it will not accept the Israeli carrier’s offer.
Danaos, which owns a fleet of 41 container ships has six box ships built in 2008 and 2009 under 12-year time charter agreements with Zim. Each has a capacity of 4,253 20-foot equivalent units and earns Danaos nearly $23,000 a day.
The vessels, which are due to come off hire between May 2020 and May 2021, generated revenue of $10.4 million in the second quarter ended June 30.
Athens-based Danaos said Zim had stated it was unilaterally reducing all of its long term charter payments to ship-owners by 35 percent from Sept. 1 for an indicated period of three years.
Danaos said it has "not accepted this offer, nor acquiesced to this reduction … and … is in discussions with Zim and evaluating the situation."
Zim, the world's seventeenth largest ocean carrier, has 57 ships of 144,750 TEUs on charter from leading ship-owners, including Germany's Rickmers Reederei, Hansa Treuhand and ER Schiffahrt, as well as Costamare of Greece.
The Israeli carrier, which lost $350 million in the first half of the year, has already reached agreement on a $150 million cut in charter fees for ships owned by the Ofer family, the majority shareholders of Zim parent Israel Corp.
Israel Corp, which plans to pump $350 million into Zim as part of a restructuring, has offered ship owners who cut charter rates capital notes that can be converted into shares in the carrier when it is floated on the stock exchange by 2016 at the latest.
Israel Corp., announced on Sept. 10 it will hold a special shareholders meeting Oct. 14 to approve a restructuring plan for the troubled carrier that includes delaying payment of principal on Zim bonds until the carrier pays off its secured debt.
The restructuring “is based on the assumption that the problematic situation in the shipping market will continue in 2009 and 2010 and only in 2011 will there begin a gradual recovery," Israel Corp. said in its Sept. 10 statement to the Tel Aviv stock exchange.
“Danaos could win some form of recourse in the future, but may face a lengthy litigation process,” said Dahlman Rose & Company, a New York investment bank in its Marine Transport Morning Note on Wednesday.
Separately, Danaos said it has now obtained waivers covering all prior breaches of financial covenants in its credit facilities as well as any subsequent breaches through Oct. 1, 2010.
In July, the company agreed to waiver terms for the credit facilities totaling $908 million after it violated its debt covenants in March due to losses on interest rate swaps.
Danaos owns 41 container ships aggregating 165,933 TEUs and has 28 vessels of 217,950 TEUs on order with scheduled deliveries through the second quarter of 2012.
Zim is not a charterer of any of the newbuildings, Danaos said.
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