Bidding opens for China Fishery Group’s Peruvian subsidiaries
Four of China Fishery Group’s most prized assets are up for sale as a result of the multinational fishing and seafood conglomerate’s ongoing bankruptcy proceedings.
China Fishery Group, part of Pacific Andes International Holdings, filed for Chapter 11 bankruptcy in New York City on 26 June, 2016. Judge James Garrity, who is presiding over the bankruptcy proceedings, appointed New York-based financial restructuring and advisory firm Development Specialists, Inc. (DSI) to serve as trustee for the bankrupt entities in November 2016.
In order to recoup as much of the estimated USD 1.7 billion (EUR 1.4 billion) in debt owed by China Fishery Group, DSI is soliciting bids for CFG Investment SAC and Corporación Pesquera Inca SAC, which together hold a sizeable percentage of Peru’s lucrative anchovy fishing quota. The firm is also directing the sale of CFG Investment and Copeinca, the owners and operators of a 50-vessel fishing fleet and 10 processing plants in Peru.
In an interview with SeafoodSource, DSI President and CEO William J. Brandt, Jr. said 89 separate entities have expressed interest in the assets thus far. Brandt said DSI is taking qualified bids through 8 December, and an auction will take place 13 December, unless a stalking horse bidder decides to move more aggressively in the interim.
“Those dates are aspirational, as there are national holidays in Peru, Europe, and Hong Kong, that could hold up the process. But for now, we’re planning on adhering to that schedule,” Brandt said. “If a buyer wants to step up and make an offer we can’t refuse, the process could speed up. But in order for that to happen, somebody’s got to impress me measurably. If they do, so I’ll package it to the judge and say let’s move forward.”
Excepting the possibility of a stalking horse bidder, Brandt expects the number of interested parties to whittle down by December to what he estimates will be a dozen more serious bidders.
“There are a lot of people who have expressed an interest, but to get in the game, they’ll have to show some financial viability,” Brandt said. “Out of the roughly 90 interested parties we have now, I estimate about a third to half are serious buyers. The next step is, do they have the ability to write a large check? We’re looking at companies with around USD 1 billion (EUR 837 million) in sales, but there can be a big difference between wealth and liquidity. Some of these companies have their liquidity tied up, while others have aligned themselves with private equity or hedge funds. I’m not sure exactly how it will play out, but I think when we get to the last round, we’ll be down to a dozen or so.”
DSI is marketing the Peruvian subsidiaries as a strategic investment linked to the rising global demand for food.
“These companies offer a rare opportunity to invest in a commodity that’s seeing a worldwide increase in both demand and prices,” Brandt said. “These companies have the most significant market position in Peru and possess strong operating profit margins.”
Interest has been high from fishing companies in China and Russia, and they may have the edge given their financial resources and reserves, which allow them to plan 20 to 25 years in advance, versus “private equity guys who look at a business horizon of four to five years,” Brandt said.
“Chinese banks may come in encouraged by Chinese government to offer loans to Anbang or Fosun – there are all these parts you don’t normally see in a straight sale, and that has everything to do with the worldwide implications of this particular business,” Brandt said. “The Chinese see the strategic importance of these assets in the food chain. For them, this is not different from buying a nickel mine in Australia to keep the Chinese economy humming and stocked with raw materials. The Chinese government would be very happy to tie up largest slice of fishmeal quota in Peru. So the price reflects not just the current financial situation of the fishmeal market and how El Niño has affected it, but also the fact that it an asset of increasing importance to global food stocks and the ability to grow and harvest aquaculture.”
Brandt said he has made more than a dozen trips to Peru to show off the fishmeal plants and fishing fleet, and has a team of 15 assisting in the sales process. The sale of non-core assets, including some fishing vessels and real estate, has paid administrative costs thus far, he said. As for the primary assets, the management teams in Peru are “extremely talented,” Brandt said, and have kept operations running smoothly.
“I knew if could put some daylight between them and Hong Kong – if they could operate independently – that it would work out and that’s exactly what has happened. They’re great, and I want to make them a significant part of this process going forward, which is why we’ve put in place an employee incentive program,” Brandt said.
In fact, achieving some distance from the Hong Kong-based Ng family, which owns Pacific Andes and which has waged a drawn-out legal fight to retain as much control of their company’s operations as possible, has been an ongoing struggle, Brandt acknowledged. Earlier this year, the Ngs petitioned Judge Garrity for consultation rights on the ongoing sale of its assets.
“I thought [it was] absolutely not [a good idea], given that would signal to the market, so I asked the court that the Ngs not be apprised of the sale process and not have an active role – that I should have singular and sole authority – and in fact the judge agreed,” Brandt said.
Despite the Ngs aggressiveness, Brandt said he would go along with a deal put together by the Ngs that would maximize the value of the assets in question.
“I have said if they can find a way to do this deal…Creditors don’t care who pays them as long as they are paid in full. Of course, the creditors have some doubt in their ability to do that, and the epitome of that is I’m here doing this instead of them,” he said. “But in the end, none of them will care who pays them as long as they’re paid in full.”