Grueling China Fishery bankruptcy, asset sale process approaching endgame
With an accord reached between all major stakeholders, the end is in sight for China Fishery’s Chapter 11 bankruptcy filing and related litigation, clearing the way for a sale of the company’s Peruvian assets.
A series of agreements between the Ng family, a group of the company’s creditors, and the court-appointed trustee in charge of selling CFG Peru – the firm’s most-prized asset – creates a path for the finalization of a grueling, 4.5-year-long process of bringing the company back from bankruptcy, according to the trustee, William Brandt.
Brandt said he recently reached an agreement to pay the Ng family – the majority owners of Hong Kong-based Pacific Andes International Holdings, which owns China Fishery – USD 25 million (EUR 20.7 million) in exchange for agreeing to the netting, or bundling, of all intercompany claims owed by the CFG Peru subsidiaries into one main claim. The family’s previous resistance to the bundling process had led to Brandt attempting to remove the Ngs from their director roles at the company, claiming they were impeding the sale of CFG Peru.
“There will be no opposition from the Ngs. They’ve been settled with and we’re locking arms and moving forward,” Brandt told SeafoodSource. “In the end, you’ve got to give them their due – our negotiations and my relations with them throughout the past four-and-a-half years have always been cordial and professional. That level of trust, even though we’ve had our differences, created a platform that led to finding a final solution. With payment of the USD 25 million coming from my estate to theirs, though the terms arrived at through hard-fought negotiations, will mean they are all on board and signed up [to move forward].”
Separately, Brandt has come to an agreement with a majority of the holders of the China Fishery’s senior notes and club loan consensus – who collectively have formed an entity called the ad hoc creditor group – that they will give him more time to find a buyer for CFG Peru, upon condition their debts are made whole through the sale. If that process is unsuccessful, the ad hoc group’s debt-for-equity restructuring proposal, introduced in March, will be used as a stalking horse bid on the company’s assets.
“The ad hoc group ... were not real happy, but they’ve come around to understanding they are on the cusp of agreeing to a settlement motion that does tie up most of the loose ends in the case,” Brandt said. “The court has permitted me to go out and resolicit bids, and we now have this fixed disclaimer of any interest from the Ngs and their agreement to help facilitate the sale process.”
Brandt said with those pieces in place, along with a settlement negotiated with FTI Consulting – which had sued China Fishery in 2019 alleging the company had engaged in fraud in some of its acquisitions – he is in good position to sell CFG Peru – a task he has spent the last four years pursuing in vain. He said he has sent more than 60 informational packets out to entities that previously expressed interest in the sale and expects to send out another 10 to 15, with a deadline of 1 June for those interested in the assets to step forward.
“All of the potential buyers are incredibly sophisticated people who have been hanging around this deal for a while, seeing how it shakes out. Now that we’ve cleared out the underbrush with FTI and the Ngs, there really isn’t much blocking the deal,” Brandt said.
The release price necessary to repay creditors in full is just under USD 1.2 billion (EUR 992.8 million), but there’s now a discount built into that price, as this year’s Peruvian anchoveta quota has just been set and CFG Peru is expected to bring in between USD 240 million and USD 260 million (EUR 198.6 million and EUR 215.1 million) in profit in 2021, according to Brandt. That extra cash means buyers need between USD 970 million and USD 995 million (EUR 802.4 million and EUR 823.1 million) to close the sale.
“If we’re not seeing anybody biting at that number, then we will join the creditor plan to see this case through,” Brandt said. “Either way, all of China Fishery’s [bankruptcy] cases will be resolved, the creditors will made whole, and the process will be done.”
Brandt said he expects a sale to occur, as he said the asking price as an EBITDA multiplier “compares well to what you see being paid around the world.”
“We’re well within the value range,” he said. “This really is a once-in-a-generation opportunity that will land you substantial access to the richest and most sustainable fishery in the world. My guess is that a few people will want to take a stretch.”
One complicating factor is China Fishery’s ongoing bankruptcy procedure and related litigation in the U.K. Singapore, and Hong Kong court systems. Brandt acknowledged that situation will take time to resolve, but expects it to be a matter of months rather than years, given the Ng family’s commitment to facilitate the sale process and the creditors’ interest in receiving full repayment. He noted the pending payment to the Ng family, which comes from CFG Peru’s cash reserves, will sit in escrow until the deal is complete.
“The deal is structured to move this through all the courts as quickly as possible,” Brandt said.
Brandt said he wanted to emphasize to potentially interested parties that time is short for them to make a move.
“If there is anybody out there who really wishes to make a bid for these assets, there’s an active data room, and the time is now to reach out and do that,” he said. “If people are waiting for a favorable break to happen to make this an easier deal, that has happened. If they continue to sit on the sidelines, this ship will sail without them.”
Photo courtesy of China Fishery