A creditor of Punta Arenas, Chile-based salmon farmer Nova Austral is suing some of the company’s former managers and directors for fraud, throwing yet another financial impediment at the company while it actively seeks a judicial reorganization to stave off bankruptcy.
Fratelli Investments Limited – a company formed by siblings of the Solari family, which owns Falabella, one of South America’s largest retail holdings – invested a reported USD 48.1 million (EUR 42.9 million) into Nova Austral between June 2017 and November 2022, and has now filed a criminal complaint for the alleged fraud with the Court of First Instance of Porvenir.
The suit accuses the representatives of Nova Austral’s controlling investment funds in 2017 – Altor Fund III and Bain Capital Private Equity – of fraudulently maneuvering to obtain funding for the company. In October 2022, Altor purchased Bain Capital’s stake in Nova Austral to give it full control over the company.
Specifically, the suit names Yngve Myhre, former chair of the board at Nova Austral; Halvor Meyer Horten, former board member of Nova Austral and partner at Bain Capital Private Equity; Tom Christian Jovik, Nova Austral board member and principal of Altor, Nova Austral’s parent company; Nicolás Nicolaides, former CEO of the company; and Sergio Montenegro, former CFO; as defendants who are responsible as either authors, accomplices, or concealers of the alleged crime.
The document states that “the defendants – as directors and administrators of the company Nova Austral – decided to place a bond in the stock market for USD 300 million [EUR 268 million] in 2017, knowing at least since 2016 that the company had severely breached Chilean environmental standards, as accredited in a case filed by the State Defense Council” in November 2022, local press reported.
The “breached Chilean environmental standards” allude to the historic revocation of three concessions from Nova Austral by the Superintendency of the Environment (SMA) concerning cases of overproduction that occurred under Nicolaides’s administration. The former CEO and four other former executives were brought up on charges due to this issue as well as other irregularities.
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 Chile’s southern Magallanes Region. Since then, the regulator has particularly targeted the company by levying consistent fines and implementing regular production limitations.
As a result, Nova Austral has been in a near-constant state of financial turmoil.
In 2017, the defendants, who were already aware of their environmental infractions, but had yet to face authoritative punishment for their actions, “planned, developed, and executed a criminal plan to fraudulently obtain resources for the company,” the Fratelli complaint claims, highlighting the company’s “triple line of false facts” in presenting supposedly high environmental standards, an above-average production standard, and a steady financial situation to authorities and investors.
“They concealed the company’s situation in order to get third parties to give them million-dollar sums of money and then dispose of it and completely destroy the company,” according to the suit. “At least since 2016, the company has been in serious legal violations – administrative and environmental – leading to a situation that was diametrically opposite from that which it feigned.”
Fratelli Investments referred to a mechanism through which the Nova Austral board of directors supposedly transferred its share capital to its parent companies in 2018, leaving Nova Austral, which was the actual bond debtor, without funds.
“Once that money had been [re]ceived, they made the bond-issuing company’s main assets [disappear], which were its credits against the parent company. It should be noted that the proceeds from the bond were solely and exclusively authorized to pay off debts and distribute dividends under certain conditions. There was no authorization to strip the company of its assets,” the suit reads. “The bond placement was nothing but a ruse to capture money from the public and keep their controllers, eliminating the losses they had suffered in the development of their business in Chile.”
The legal filing goes on to say that in April 2023, Nova Austral came clean in stating that harvest projections for 2023 and 2024 are “very far from the 65,490 MT that were reported when issuing the bond.”
Moneda Asset Management – a Chilean fund controlled by the Brazilian firm Fondo Patria Investment – is another significant investor in Nova Austral, with USD 30 million (EUR 26.8 million) sunk into the company. It, too, is reportedly considering legal action against those formerly responsible at Nova Austral.
Nova Austral's liabilities total a reported USD 559 million (EUR 499 million). Its three largest creditors are Nordic Trustee (USD 415 million, EUR 370 million), which represents the company's bondholders; DNB Bank (USD 69 million, EUR 62 million); and Skretting (USD 23 million, EUR 20 million).
The company has been under intense public scrutiny since 2019 after Chile’s National Fisheries and Aquaculture Service (Sernapesca) began investigating the company’s alleged underreporting of mortalities – an infraction for which lead to criminal charges followed by fines for reported inadequate mortality and waste management.
Nova Austral previously said its previous behavior was “completely misaligned” with its business ethics, and its board of directors commissioned an internal and independent investigation to detect and correct the internal problems that led to the misreporting. That effort resulted in a complete overhaul of the company’s senior management in 2019.
In response to the Fratelli claim, Nova Austral said in a brief release that the legal action does not specifically target the company’s active executives; rather, it is part of a conflict between shareholders and bondholders for events unrelated to the company’s current administration. As such, the company believes this legal action does not alter the operation or the judicial reorganization process which the company is currently undergoing.
Photo courtesy of Nova Austral
