Trustee moves to kick off China Fishery sale; cites 65 interested parties
China Fishery Group trustee William Brandt is asking a New York court for permission to auction off the Peruvian operations of the Pacific Andes group, a potentially billion dollar asset.
If approved, the motion would see the auction take place on Dec. 13 with the sale formally closed on Jan. 15, 2018.
According to Brandt, "approximately 65" parties, some of who participated in the aborted 2016 sale process of China Fishery, have expressed interested in the sale and "several" have signed confidentiality agreements allowing them access to a data room with due diligence information.
Selling China Fishery, the fishmeal and fish oil producing subsidiary of parent company Pacific Andes International Holdings (PAIH), has long been seen by creditors as the best way to obtain repayment from a group with liabilities of over 1.5 billion.
The group was once the world's 12th largest seafood firm by revenue, as tracked by Undercurrent News's annual top 100 report, but a liquidity crisis and fallout from El Nino during the 2014 to 2016 period prompted a bankruptcy filing and restructuring effort.
The Hong Kong-based Ng family, which founded and built the group into a powerhouse, filed the June 2016 bankruptcy petition in New York in order to stave off a forced liquidation of China Fishery that they say would have led to a "fire sale", undervaluing the unit.
But after creditors levied allegations of fraud and asserted that trust in PAIH's management had broken down, judge Garrity appointed Brandt to stabilize China Fishery and arrange for its sale.
With its Russian pollock trading business stalled pollock trading business stalled, its Namibian mackerel-catching venture Namibian mackerel-catching venture on the rocks, losses mounting in its Chinese fillet processing unit and few significant assets outside of the fishmeal and fish oil business, a lot is riding on a successful auction of the unit.
Pricing the assets
A number of hurdles need to be cleared prior to the auction. First an Aug. 16 hearing will be held to determine the bidding procedures, a process that will also give the parties time to file objections. Also by that date, the trustee plans to begin conducting tours of the Peruvian operation for prospective bidders and host meetings with the operation's management.
By Oct. 16, Brandt hopes to determine a "sale threshold", a minimum price for the Peruvian assets. The drafting of a "plan of liquidation", which will include a plan of how the sale proceeds will be distributed to creditors, will follow. Final bids will be due Dec. 8, subject to court approval.
However, Brandt also called the schedule "aspirational" and "subject to change depending on a number of factors, including, but not limited to, the volume of bids and/or other indications of interest during the earliest stages of the sale process".
Previous sale
According to court documents, the previous sales process had progressed to where 18 bidders had received non-disclosure agreements to obtain more due diligence. Of that total 13 signed or were reviewing the agreements. Only two bidders -- a group involving Dutch fishing group Parlevliet and Van der Plas (P&), Iceland's Samherji and US private equity giant Blackstone Group -- and Peru's Brescia Group, the major shareholder of fishmeal maker Tecnologica de Alimentos Somos (TASA) paid $100,000 deposits needed to make it to the final round of bidding.
The interest of P&P -- which recently added a large tuna fleet to its pelagic, groundfish and shrimp vessels -- was previously reported by Undercurrent News. P&P and Samherji have several investments in fishing in Europe together, under the UK Fisheries joint venture.
TASA is the second largest anchovy quota holder in Peru, behind China Fishery.
Fosun Group, which had tried to buy into the Peruvian anchovy sector before, with an offer for Pesquera Diamante in 2014, is named as another that was involved in the process, in a combined bid with Shandong Shengli Bio-Engineering, a bioengineering company based in Jining, China. The interest of Fosun in China Fishery was previously reported by Undercurrent.
China Fishery was valued in 2015 at $1.6bn level, based on an assessment from JRB Consultores, which was then verified by the consultancy Deloitte. In order for the Ng family to receive anything from the sale, China Fishery would have to fetch more than $2.8bn at auction, according to financial analysis filed with the New York court. That figure is considered unlikely.
The Ng family had been hoping for over $1.7bn for the Peruvian business, but Jessie Ng, who heads parent company PAIH, acknowledged in legal documents in June 2016 that this was not possible, given the macro-economic situation and the company’s then state.
According to a declaration from Ng, however, there were seven non-binding expressions of interest from possible buyers for the company’s fleet and plants in Peru. Francisco Paniagua Jara, general manager of China Fishery's Peruvian arm, CFG Investment, stated non-binding offers for the business came in between $675m and $1.5bn, in a separate document.
China Fishery’s earnings before interest, taxes, depreciation and amortization (ebitda) would be $200 million, in “a normalized year”, based on production of 300,000 metric tons of fishmeal and 50,000t of fish oil, according to the deposition from Paniagua Jara.
However, with El Nino hitting fishing in the past few years, this level of ebitda has not been achieved. Figures for the first half of 2016 show a big loss for the company’s fishmeal operations.
Corporation Pesquera Inca (Copeinca), bought by China Fishery in 2013 for around $780m plus debt, reported a net loss of $4.90m for the period from Jan. 1 to June 30, 2016. Copeinca’s turnover for the period was $108.48m.
The accounts state that Copeinca’s turnover for 2015 was $234.41m, with a net profit of $5.44m.
CFG Investment, which covers the other China Fishery-owned fishmeal and fish oil production companies, lost $13.74m in the first half of 2016, compared to $20.45m in 2015.
But more recently the situation at the Peruvian companies has improved, Brandt has said.
Copeinca exported 14,309t of fishmeal during the January to April 2017 period, worth $20.1m. The company exported 30,700t in 2016 worth $46.4m, according to Peruvian statistics. Copeinca maintained its position as Peru's sixth largest exporter.
The other Pacific Andes-owned fishmeal unit, CFG Investment, is recovering its fishmeal output rising from 18th place during 2016, when it produced 2,589t worth $3.8m, to ninth place. CFG Investment manufactured 7,688t during the first four months of 2017 valued at $10.9m.
Source: Undercurrent News. Date: 2017-08-01