With debts complicating sale, China Fishery bankruptcy trustee seeks USD 624 million compromise
Facing hesitation from firms interested in buying China Fishery’s Peruvian assets out of bankruptcy, the company’s court-appointed trustee is seeking to consolidate a web of debts into one claim valued at USD 624 million (EUR 512 million).
William J. Brandt is seeking as much as USD 1.7 billion (EUR 1.4 billion) for China Fishery’s assets in Peru, considered to be the “crown jewels” of the bankrupt firm. The Peurivan assets are collectively owned by CFGL, a Singapore-based holding company that is part of the larger China Fishery’s empire, which also includes the Pacific Andes umbrella of companies – all of which are owned and operated by the Ng family.
However, Brandt indefinitely postponed the sale in December, and court documents filed in late February reveal that thousands of individual claims of money owed by CFGL could have been a factor in the decision. Of particular concern to Brandt is a single USD 459 million (EUR 376.5 million) intercompany claim owed by one of the Peruvian subsidiaries to China Fishery International Limited, a separate branch of the larger China Fishery corporation.
“Uncertainty surrounding certain intercompany claims is likely to chill bidding in the CFG Peru sale, since potential bidders cannot be sure whether they will be liable for any intercompany claims even after the consummation of the CFG Peru sale process and exit from these Chapter 11 cases,” Brandt’s attorney wrote in court filing.
The filing requested that Judge James Garrity, who is presiding over the case, consider consolidating all of the claims against the Peruvian companies using a legal process called “netting.” The netting process enables the bundling of all intercompany claims owed by the CFG Peru subsidiaries into one main claim.
Under the agreement, the netting is voided if the CFG Peru assets are sold for less than USD 980 million (EUR 803.6 million) by 30 June, 2018. At that price, the sale would reap enough profits to satisfy all of CFG Peru’s debts as well as its administrative expenses, ensuring no creditors would be harmed by the netting, Brandt argued in his filing. Even if the sale did not raise enough funds to cover CFG Peru’s netted debt, Brandt wrote to Garrity, those owed money are more likely to recoup at least some of their debts through a sale, which is much less likely to happen without the netting.
The agreement “represents a good-faith, arm’s-length, and reasonable solution to the issues surrounding the intercompany claims between the other debtors and their non-debtor affiliates on the one hand, and CFG Peru Singapore and the CFG Peru Singapore Subsidiaries, on the other hand,” according to the document filed by Brandt. “These issues could otherwise discourage bidding in the CFG Peru sale process, delay the successful resolution of these Chapter 11 cases, and require the expenditure of a significant amount of the estates’ limited resources if it became necessary to resolve any dispute over such claims on a contested basis.
Court approval of the settlement agreement, Brandt concluded, will allow him to move forward with the CFG Peru sale process “expeditiously.”
Garrity is scheduled to rule on the request at a 14 March hearing.