Zhonghai Ocean confirms interest in Pacific Andes

Published on
September 6, 2018

Zhonghai Ocean Science & Technology Co. has confirmed it is one of the suitors for the Peruvian assets of Pacific Andes, the Hong Kong-based seafood giant that filed for Chapter 11 bankruptcy protection in the United States in 2016.

The Qingdao, China-based firm has a hand in many marine industries, including the production of fish oil for human consumption and aquafeed, as well as ocean shipping, equipment manufacturing, and cold storage. 

The revelation was made in a court document filed in opposition to a motion made by William Brandt, a court-appointed trustee overseeing the unwinding of Pacific Andes’ Peruvian assets, which include Copeinca, a fishmeal and fish oil producer purchased by Pacific Andes in 2013. Brandt is seeking to sell Copeinca’s headquarters in Lima for USD 17 million (EUR 14.6 million), but Zhonghai Ocean Science & Technology Co. expressed its displeasure at the effort, arguing the headquarters are an integral part of the asset package it is interested in buying.

“Should the headquarters be sold at this point for short-term gain, the Peru operations will need to pay rental expense and suffer a consequent reduction in EBITDA,” Zhonghai Ocean wrote in its court filing. “This outcome has two potential consequence. Firstly, the operations will be viewed as less attractive by potential plan investors who are focused on investment value in terms of a multiple of EBITDA. In addition, in the long-term, there will be a growing reduction in EBITDDA as commercial rents in Lima grow. Either way, this will depress the value of the overall Peru assets in the eyes of potential investors.”

In his own filing, Brandt argued that because the headquarters has more space that can be used by Copeinca and its parent firm China Fishery Group Investment, “it is prudent to relocate Copeinca’s headquarters into less expansive and more modern rental office space.”

Brandt is pursuing an immediate sale of the property to Grupo Lar, a Peruvian commercial real estate group. That effort is backed by a group of Pacific Andes creditors holding 9.75 of the company’s total debt.

However, in addition to opposition by Zhonghai Ocean, the move is also being challenged by the Ng family, the owners of Pacific Andes parent company China Fishery Group.

“[We] are concerned that a stand-alone sale of the Copeinca headquarters at this time will have the unintentional consequence of deterring potential bidders and/or Chapter 11 plan investors and depressing potential value recovered at a time when there is no demonstrated need or urgency to sell this particular asset,” China Fishery Group said in its own legal filing.

Both the Ng family and Zhonghai Ocean argued that a sale of the headquarters would disrupt the company’s business operations at a time when “the Peruvian business is experiencing its most successful fishing season since the devastating El Niño weather event that precipitated the Pacific Andes Group’s financial distress.”

“Accordingly, the debtors believe the results from this past and upcoming fishing season are critical to the recovery of the business, and, therefore, the success of the Chapter 11 trustee’s sale process.”

Grupo Lar has set a deadline of 15 September for the transaction to take place. Brandt is pushing for the judge hearing the case to approve the sale by that time. In his filing, Brandt said only one potential bidder – ostensibly Zhonghai Ocean – has expressed a preference that the headquarters not be sold. 

“[I] cannot allow Copeinca to pass up an opportunity to sell the Copeinca headquarters at an attractive price to appease one potential bidder, who, despite being a participant in the CFG Peru sale process for over seven months, has yet to hire U.S. counsel or submit any indication of interest, non-binding or otherwise,” Brandt wrote in the 31 August filing. 

Brandt has been seeking as much as USD 1.7 billion (EUR 1.4 billion) for Pacific Andes' Peruvian assets, the equivalent of the amount of debt owed by CFG. However, a sale has not yet been consummated. In a July interview with SeafoodSource, Brandt said he is having “a little tougher time than many of us expected” in selling the assets, which include CFG Peru Singapore, the owner of 16 percent of the anchoveta fishing quota in Peru, in addition to 17 fishmeal processing plants in Peru and more than 50 fishing vessels catching anchovy, mackerel, and jack mackerel.

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