William J. Brandt, the president and CEO of financial restructuring and advisory firm Development Specialists, Inc. (DSI), is the court-appointed trustee overseeing the sale of China Fishery’s Peruvian assets, as part of its Chapter 11 bankruptcy proceedings. Unable to secure a sale of the assets, Brandt has signed off on a plan formulated by the company’s creditors to take over the company.
In an interview with SeafoodSource, Brandt discussed the details of the sale process and offered predictions for how the company will be handled by its new ownership group.
SeafoodSource: You have said the upcoming presidential election in Peru harmed your chances for selling the assets of CFG Peru Singapore (Peruvian Opcos). How so?
Brandt: No one would have predicted this deal would be coming to culmination in what amounts to one of the larger political upheavals in Peru’s history. Peru has had four presidents in the past four years, and they’ve got another presidential election coming up in July. One of the candidates has publicly announced the oceans belong to the people and that he is thinking of nationalizing the country’s extraction industries. The other candidate has not been very strong in support of the fishing industry. If you’re thinking of throwing a billion dollars into the industry in Peru, the current campaign gives you plenty of pause and second thoughts. Just as we finished our negotiations creating a glorious horizon of alternatives, this election threw everything into doubt. As the election came into focus in very late April and into May and some of the positions the candidates were talking became publicized, the amount of ardor in pursuit of these assets dropped off. Of course, this was all happening just as we finished negotiations creating a glorious horizon of alternatives for the Peruvian Opcos. This election has thrown everything into doubt. I think we are just a victim of timing.
SeafoodSource: Did you have serious interest from buyers before the sale-date deadline of 1 June?
Brandt: We had a fair amount of interest when we started the resolicitation process, a lot of people who had been lurking around this case for a long time. I knew them and they would check in with me, and we would debate pric[ing]. They were actively involved, and I believed right up until the latter week of April that this was going to sell once creditors established a number that had to be beaten. But the election caused a lot of anxiety, and on top of that, recently Peru announced its true death rates from COVID after recalculating its morbidity rates, and that gave it the highest death rate country in the world for COVID. So they’ve had a terrible run of it, and the economy has suffered mightily, and maybe as a result the population is more than a bit restive and willing to embrace [political] candidates they might not otherwise support.
As I mentioned, all interest in a deal withered on the vine after the two candidates emerged from the first round of elections in April. By the second week in May, most of the potential buyers were distraught by the turn of events in Peru and were not contemplating putting that kind of money at risk before an election. Smart minds would have waited six or seven months to wait see where winds were blowing, but it became a difficult endeavor to continue the sale process once the creditors’ plan emerged.
SeafoodSource: What do you think of the creditors’ plan?
Brandt: I worked with creditors to foster their offer so it would work as a stalking horse and that other bidders could simply bid up the creditors plan. But without that, I’m happy to heartily endorse the creditor plan. Effectively, they’ll be paying themselves in full, as they will take the business, operate it for a number of years, and then have an exit strategy, I assume, as they’re all smart people in the private equity business. By that time, all the baggage of the bankruptcy will be well in the past and this will be just another fishing company making a fair amount of money – assuming the politics in Peru don’t get in their way.
SeafoodSource: Have you had any conversations with the creditors about the future of the business?
Brandt: As the negotiations proceeded, I was in regular contact. They have not shared their plans for the future in detail, but their managers have had significant success in the business world and I think the business is in good hands.
It should be noted that the creditors here are not the same creditors the business originally owed money to. These are big-time hedge funds, investment funds, and money-management players that have moved into these debts and bought them up. These are people who are interacting with sovereign funds as well, probably on a weekly basis.
SeafoodSource: What do you think the creditors will do with the assets once they have control?
Brandt: During bankruptcy, this company has done phenomenally well. I’m leaving these people with USD 250 million (EUR 205 million) in cash, and they might even improve their margins somewhat in coming years. For a company as profitable and future-oriented for this, there are a number of potential exit strategies, and they’re all good.
I see two scenarios for the Peruvian Opcos going forward: the creditors will either take it private without the compliance costs of bankruptcy and the attention comes with it, and without the fight with the Ngs (which own the company), who will be in the rearview mirror. So they’ll put capital investment into it and at end of three years, they’ll still be holding the largest slice of quota in Peru’s fishmeal sector, which is one of the world’s most sustainable fisheries. I could easily see that happening.
The second option is, three to four years out, they do an offering in one of the hotter IPO markets, like maybe in Hong Kong or Shanghai. They can set up a template of doing an IPO, what it would be priced at, and could also run a parallel track to buyers, saying if you want to pay price, it’s available, or we’ll just do the IPO.
SeafoodSource: Are you disappointed you didn’t get a sale completed?
Brandt: Honestly, it’s just part of my job, which was to preserve and enhance the value of the assets and return as much as possible to the creditors. The business is not only surviving but is prospering greatly. On the day I was appointed, these entities were on the verge of insolvency and had no line of credit. They’re now able to operate self-sustainably on their own cash, despite still not having line of credit. We really cleaned up the business and I’m proud we saved 2,500 jobs. Would I have loved to have a USD 1.56 billion (EUR 1.28 million) sale? Sure, it would have been a nice feather in my cap, but my goal was to find a way out for the creditors and we did that. I think most everybody would have preferred a cleaner sale, but as the process wore on and we unraveled every layer of this onion – it was a very complex case, involving 11 different national jurisdictions – things just kept popping up and frustrating us as we tried to get to the point where we can convey the assets.
SeafoodSource: Given the complications of China Fishery’s organizational structure and the web of financial entanglements the company was involved in, in retrospect, do you think a sale was possible?
Brandt: There’s a famous phrase – when there’s a bus accident, more people jump on than jump off. When the amount of money in the Peruvian Opcos pot kept growing to a hellaciously large sum, that just attracted more and more players. The very success of the business meant that the stakes were worth fighting for and that added to [the] complexity [of the sale process]. And the case was delayed time and time again by issues involving the Ng family. I was working around FTI lawsuits against the Ng family and against Peruvian Opcos.
SeafoodSource: Do you hold a grudge against the Ng family? It seemed like you were at loggerheads with them for much of the past five years.
Brandt: They’re tough businesspeople, and I’ve said before I think they cut a few corners here and there, which caused a few problems, but I don’t have any personal feeling of animus toward them. They’re not Al Capone and the mafia, which is the story I was getting from people when I walked in the door. Sometimes they’re the gang that can’t shoot straight. What I found out was, like any family-owned business, sometimes they get in their own way and sometimes they’ve been fairly prescient with the moves they made.
I won’t say the Ng family is without blame by any means. But our relationship, even when there were strong differences, was always cordial and businesslike. There were a couple of things where, you can see from the proceedings, there were disagreements. But I didn’t take it personally – they were fighting for their survival and to pursue as much of their assets as they could. I have no great warning to the food or fishing industry about the Ngs. They have been in the industry a long time and are a known entity. They have had some success and some failures, and that would describe about 90 percent of the fishing industry as a whole.
SeafoodSource: Are you walking away from this case with any regrets, or are you OK moving on from it?
Brandt: Honestly, it’s one more case off of my docket. I think it can more than reasonably be called a successful case because the creditors are being paid in full. Yes, some of that is in-kind rather than in cash, but they’re getting full value for their claims, and that type of win is not frequent in bankruptcy. So I think it’s a very good outcome. Of course, a sale three years ago would have been quicker, but in many ways, I’m happy to pass the baton off to fresh legs and a new set of eyes. The people who are taking over are obviously people who have made their investments in this business with eyes wide open. They are pretty savvy investors and they’ll probably do well with it and I wish them well. I’m just glad jobs were saved and we did our best to have the business flourish as well as do good by Peru.
Photo courtesy of DSI
