Pescanova’s uncertain future
Pescanova’s shocking 1 March filing for preliminary protection against its creditors (preconcurso) and deferring a payment of EUR 15 million (USD 19 million) has caused a nose-dive in its share price and a sharp increase in doubts as to the future of the Spanish multinational, one of the 10 largest fishing groups in the world. This uncertainty has only been increased by the failure of the company to offer any official explanation as to what led to this situation or its plans for the future.
In the meantime, Spanish regulator CNMV has opened an official investigation into possible market abuse by the company, and suspended it from quotation on the market. According to sources at CNMV, “the company did not send us the results of the 2nd semester of 2012, which they should do shortly together with some additional information about their balance sheet, and debt level for making it available to the public."
Over the last two weeks Pescanova has attempted to buy time to re-examine its strategy, which may include a new industrial shareholder. Some analysts have suggested the company may be the target of a hostile takeover, as it lacks a strong core group of shareholders and the management of the current CEO, Manuel Fernández de Sousa-Faro (still the main shareholder, with 14.5 percent) has been strongly criticized by creditor banks and shareholders.
The 53 year-old Pescanova Group, based in the city of Vigo in the northwestern Spanish region of Galicia has some 10,500 employees and a presence in 20 countries around the world, including the United States and Japan. It is the frozen fish and seafood leader in both Spain and Portugal and has, until now, been regarded by top brokers as a safe investment. At the end of 2012, Pescanova announced profits and its shares from part of the mutual funds of numerous investors, both small and large. So, why has it amassed debts of nearly EUR 1.600 billion (USD 2 billion), with some analysts claiming it could be as high as EUR 2 billion (USD 2.6 billion)?
The main reason is probably that the company is highly leveraged, said Javier Galán, investment fund manager of Renta 4. Pescanova has made large-scale investments in aquaculture plants, which were both poorly timed and have failed to deliver the expected return, noted Galán. Particularly symbolic is the case of its salmon plants in Chile, which involved significant indebtedness with financial institutions and the issuing of corporate bonds prior to the world financial crisis.
What’s more, the far-reaching financial crisis in Spain has led banks to significantly tighten their credit terms, which finally has pushed Pescanova to the edge. Nevertheless, the importance of the Galician company to the Spanish economy is such that a group made up of its leading creditor banks has begun to negotiate the refinancing of the company’s debt to “prevent its failure.”
According to trade union sources, Pescanova’s senior management in Galicia have told workers that the current situation will not affect their day-to-day work, as the raw materials to sustain current production levels are guaranteed and there is enough product inventory to supply its markets for at least two months. And in a brief statement released on 14 March, the company only noted “the normality that Pescanova keeps both in its domestic industrial centers and its fishing and aquaculture operations abroad."