China Fishery assets being shopped to Middle Eastern sovereign wealth funds
William Brandt, the trustee overseeing the sale of China Fishery’s Peruvian assets, has thus far failed to attract an offer that meets the minimum threshold mandated by his court appointment, and so he’s trying a new tactic.
Brandt has asked the judge overseeing China Fishery’s Chapter 11 bankruptcy filing in a New York court for permission to hire Asab Investment; a company based in Abu Dhabi, United Arab Emirates, with connections to leaders of sovereign wealth funds owned by Middle Eastern states.
Asab will receive a USD 10 million (EUR 8.8 million) commission if it introduces Brandt to an eventual buyer of the Peruvian assets, so long as the buyer is a sovereign wealth fund. The fee will be treated as an administrative expense and paid from the proceeds of the sale, should it occur. Asab will still be paid if a sale is consummated at a price below the sum of the sale threshold but on a proportionally lower basis, according to documents filed with the
However, in an interview with SeafoodSource, Brandt said the publicity surrounding the deal with Asab may have scuttled it.
“The attendant publicity that's already come out of this has soured them on this particular episode, and I’m not sure that we’re going to go forward. They work best under the radar, and they’re thinking it’s not exactly under the radar now, so I’m not sure if we’ll go forward with this particular application,” Brandt said. “They don’t need the work. Their connections are good enough that a lot of people are trying to get them to work for them, so it may have been the attending publicity was more than they choose to bear. I’m going to talk to them in the next several days but given the publicity, I sense a reluctance on their part to go forward.”
Asab specializes in facilitating transactions involving the sovereign funds in the Midde East. One of its co-founders and directors, Suhail Alansari, previously worked in the executive office of the Crown Prince of Dubai and the Mubadala Investment Company, a sovereign wealth fund in Abu Dhabi that has other holdings in the global seafood industry. Another co-founder, Yousef Al Ansari, previously worked in senior roles at ADNOC Gas Processing, a subsidiary of the Abu Dhabi National Oil Company, and Abu Dhabi Ship Building Company, which was founded and remains majority-owned by Mubadala. Asab primarily works in the energy and real estate sectors, and has closed six deals with the sovereign funds in recent years, including a USD 120 million (EUR 106 million) joint venture partnership to explore and develop five oil and gas sites in the United Arab Emirates.
“Asab’s founders are some of the most experienced individuals in working with the sovereign funds, with over 40 years of combined experience, and have deep personal and professional relationships with the sovereign funds. The Chapter 11 trustee [believes] that the services of Asab will allow him to more successfully engage in a potential CFG Peru sale with a sovereign fund,” Brandt wrote in his court filing. “Given Asab’s experience and familiarity with key decision0makers at the sovereign funds, potential transactions presented by Asab are more likely to be given serious consideration by the sovereign funds. In addition, Asab is able to identify the appropriate channels at the sovereign funds to help ensure a transaction is evaluated and progressed expeditiously.”
Brandt said if Asab pulls out of the agreement, he may decide to use other intermediaries to connect with sovereign wealth funds, which he perceives as a prime potential buyer, according to the court filing.
“While the Chapter 11 Trustee has engaged with intermediaries and principals at several sovereign wealth funds … it is in part the feedback and knowledge he has gained through those interactions that helped him to understand how critical an effective intermediary is in order to successfully engage with the sovereign funds. While the sovereign funds have not been active in the Peruvian market in the past, they have participated in a number of transactions in the United States and have more recently shown an increasing interest in the Central and South American markets. In addition, the sovereign funds have in recent years increased their focus on state owned industries. Further, the Sovereign Funds have significant amounts of readily available capital, which means they have the ability to consummate a transaction like the CFG Peru Sale without the need for outside financing,” Brandt wrote. “The Chapter 11 Trustee understands that the sovereign funds are approached by a large number of parties regarding potential investment opportunities. In order to increase the likelihood that the CFG Peru Sale is evaluated by the sovereign funds, it is desirable to approach the sovereign funds through an intermediary that has pre-existing relationships with the sovereign funds and that can arrange the necessary introductions and facilitate communications.”
Sovereign wealth funds have an inherent advantage in their capability to ensure stability in Peru’s governance of its anchovy quotas, Brandt said.
“Peru has been a very welcoming entity for overseas investments – it’s one of the more solid citizens in the world in attracting overseas investment, especially considering mining and fishing are considered two of its big industries – but many of the world’s entrepreneurs who are used to working in various political systems around the world believe that if they buy the largest fishing quota in Peru for north of USD 1 billion (EUR 887 million), that at some point farther down the line, they might not have the political capital they need since they weren’t Peruvian nationals. If the political upheavals in Peru continue, that could affect the quota system, and they wouldn’t have a way to offset that,” Brandt said. “The sovereign funds are all essentially government-owned, so if you are Peru and you become of a mind to change the quota system, but the largest quota owner was another government, I think that would force a bit of soberness into the conversation about what you would or couldn’t do, because there’s a gravity on both sides that perhaps a singular entrepreneur doesn’t bring to the table.”
Brandt said he’s received two formal offers for the CFG Peru assets, but both were under the minimum amount required to clear the threshold of the netting agreement. Brandt said that threshold currently sits at around USD 1.1 billion (EUR 975 million), but that the number shifts as interest accrues. The deal is also affected by profits made by CFG Peru, which Brandt estimated would land at between USD 150 million to USD 170 million (EUR 133 million to EUR 150 million) this year.
“If that’s the case, what you’re really talking about is approximately USD 950 million (EUR 842 million) in new cash [for an offer to reach the netting agreement’s threshold], because you’re also buying the cash that’s accrued,” Brandt said.
Brandt said he’s sent information about the sale to more than 325 entities and that he’s had “meaningful conversations” with more than 50 of those entities, with 12 to 18 signing non-disclosure agreements in order to complete due diligence
“It’s time to finish it and be done – this should be squared away. I am thankful I am actively talking to a number of buyers and we are beginning to exchange offers. The problem structurally is that the offers I have received so far don’t get me to where I need to be, but it’s a start … There’s always a bit of bargaining and that’s where we are now,” he said.
Brandt called the deal a “once-in-a-lifetime opportunity,” offering a lower price-point for Peru’s anchovy quota than has been seen on the market before. But he said he’s been surprised by how long it is taking to find a willing buyer, which he attributed in part to “the glare of complete transparency” the transaction has due to it moving through a court-approved process.
“[This is] very tough to do that when everyone is watching what you’re doing on a real-time basis and critiquing it or otherwise getting in the way. I know that comes with the territory – don’t buy me any flowers for that,” Brandt said. “But I also recognize that in some cases, such as case of Asab, people don’t have to work for me or with me, and if they don’t want attendant publicity, they can say no, which has happened in this case.”