A group of investors in the beleaguered seafood conglomerate China Fishery Group has offered a debt-for-equity restructuring that would give it control of the firm’s fishmeal business in Peru.
The so-called “ad hoc creditor group,” composed of investors holding a majority of the senior notes and club loans in the Singapore-based company, have proposed a restructuring support agreement that would convert USD 700 million (EUR 581.4 million) of existing debt into new equity, “facilitating a path to exit Chapter 11” bankruptcy, which the company entered in 2016. The agreement would also provide USD 150 million (EUR 124.6 million) in new funding to the company.
“The transaction is expected to significantly reduce outstanding indebtedness and annual interest costs, improve the capital structure and liquidity, and result in an enhanced financial foundation that paves the way for future strategic growth of the business,” the creditors said in a 2 March press release.
The ad hoc group is offering consent fees to creditors who become a party to the agreement through March 2021, and has promised to issue a cash distribution of not less than USD 75 million (EUR 62 million) to shareholders if and when the deal is consummated. Those funds will be taken from excess cash generated by the Peruvian fishmeal operation and the proceeds gained from China Fishery’s sale of its vessels Damanzaihao, Enterprise, and Pacific Champion.
In its own 3 March press release, China Fishery’s board of directors, which is controlled by the Ng family, announced its opposition to the agreement.
"The board would like to confirm that this is an initiative taken by the Ad Hoc Group [of creditors] and not in conjunction with the board,” China Fishery Executive Director and CEO Ng Puay (Jessie) Yee said. “The company will announce further updates on these proceedings as significant developments arise.”
The proposal represents a solution to a problem that has vexed China Fishery’s Chapter 11 trustee, Wlliam Brandt. Brandt was tasked with selling off China Fishery’s Peruvian assets but has thus far failed to attract an offer that meets the minimum threshold mandated by his court appointment. Brandt has said thousands of individual claims of money owed by China Fishery have scared potential buyers away. In particular, China Fishery’s creditors claim the company’s debt was secured by its Peruvian fishmeal assets has complicated the sale process, Brandt told SeafoodSource.
“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 a June 2020 court filing.
