Financially distraught Nova Austral floats three options for restructuring

Creditors of the troubled salmon-farming firm Nova Austral have decided to push back a vote on a proposed restructuring until 9 November, after the beleaguered Punta Arenas, Chile-based company – reportedly USD 560 million (EUR 530 million) in debt – proposed three different reorganization options.

To date, financial creditors have been unable to agree on a consensual restructuring proposal, the company said in a statement via the Oslo Børs. Amid numerous sanctions from Chile’s environmental regulator and attempts to stave off bankruptcy, the company’s first attempt at restructuring failed. Judicial reorganization proceedings began in June, and a Chilean court issued the reorganization resolution in July.

Nova Austral presented its first draft of the restructuring plan at the beginning of August, but the creditors' meeting has now been postponed four times.

“The company's dialogue with its key creditors has made it clear that they would not support the initial restructuring plan," Nova Austral said. "Therefore, the group has taken note of the feedback provided by its key creditors and has diligently been working on a revised proposal, which aims to address their key concerns."

The possibility of Nova Austral closing down and going out of business is not just a significant concern for investors. José Gabriel Parada, mayor of the borough of Porvenir where Nova Austral operates, said the company accounts for nearly 40 percent of jobs in the area, supplying 800 direct jobs and 2,000 indirect jobs.

“We look forward to seeing how the company will reorganize, which could be the solution we need. If bankruptcy occurs, we have already stated that we do not have the capacity to absorb the number of people who would be left without work, nor is there a state plan,” Parada told local radio station BioBio.

In an effort to avoid bankruptcy, Nova Austral came up with three different reorganization options. The first entails a full discharge of all outstanding amounts under the company’s existing secured bonds, 50 percent discharge of all credits under the company’s existing secured revolving credit facilities, and the establishment of USD 15 million to USD 23 million (EUR 14.2 million to 21.8 million) in working capital financing, in which bondholders will have preferential right to participate. It also includes a 50 percent partial discharge of the company's super senior revolving credit financing, with the remaining half to be rescheduled in five equal annual installments, the first of which is due on 30 September, 2024. Under this option, Nova Austral’s current shareholders will sell all company shares to lenders under the working capital financing.

The second of the three alternatives involves rescheduling of the company’s secured debt, without interest accrued, to be paid in a single installment on 30 September 2024 or when the company shares are sold, whichever comes first. It also would feature a structured sale process, the net proceeds of which would be distributed among secured creditors according to the existing intercreditor agreement. If the proceeds cannot cover the full payment to key creditors, all existing debt shall be forgiven and remitted. This option would also have secured working capital financing of up to USD 7.5 million (EUR 7.1 million).

The third option involves a full discharge of all outstanding amounts under the company’s existing secured bonds. Bondholders would have the preferential right to participate in a capital increase of new shares for up to USD 7.5 million (EUR 7.1 million), which – if fully subscribed – will represent an aggregate shareholding of 49 percent. This alternative would convert USD 15 million (EUR 14.2 million) of the principal amount outstanding under the existing secured revolving credit into equity, representing 51 percent of aggregate shareholding if the capital increase is fully subscribed. Restructuring of the remaining outstanding amount would occur under the existing secured revolving credit in a single installment, due 30 October 2026. There would also be secured working capital financing of up to USD 8 million (EUR 7.6 million).

Under all three alternatives, Nova Austral said that feed suppliers who have provided secured supplier credit to the company shall receive rescheduled payments in 60 equal, successive monthly installments. The first such payment will go to suppliers six months following the approval of the restructuring agreement.

Unsecured creditors will receive repayments in 48 equal, successive, rescheduled monthly installments, also six months from the agreement’s approval. Unsecured creditors whom the company deems critical for business will receive similar payments but in 24 monthly installments.

Nova Austral has been under intense public scrutiny from Chile’s National Fisheries and Aquaculture Service (Sernapesca), which began investigating the company’s alleged underreporting of mortalities in 2019. That led to criminal charges against the company, resulting in fines for reported inadequate mortality and waste management. Further, the Superintendency of the Environment (SMA) revoked three concessions from Nova Austral due to overproduction, and the State Defense Council (CDE) accused the company of providing false information to the treasury and abusing the Navarino Law, which provides benefits to companies that set up and operate in the Magallanes region. Since then, the regulator has particularly targeted the company by levying consistent fines and implementing regular production limitations.

Ever since, Nova Austral has been in a near-constant state of financial turmoil.

Photo courtesy of Nova Austral