The Ng family, which owns Singapore-based Pacific Andes and its subsidiary fishmeal and fish oil supplier China Fishery, is fighting back against an effort to remove it from positions of control over the board of the company’s Peruvian assets.
William J. Brandt was appointed by U.S. Bankruptcy Court Judge James Garrity in November 2016 to act as an impartial arbiter for the restructuring of CFG Peru Singapore’s assets and business during its parent company’s Chapter 11 reorganization. CFG Peru is a holding company for three anchovy fishing and processing operations in Peru, and is considered the most lucrative asset of China Fishery, which at one time was ranked as the 12th-largest seafood company in the world.
On 22 May, Brandt asked Garrity to remove the members of the Ng family and their associates from their positions of control over the company, claiming the Ngs were blocking his efforts to restructure CFG Peru’s balance sheet using a process called netting, which would bundle all intercompany claims owed by the CFG Peru subsidiaries into one main claim.
However, in a 9 June response, the attorney representing the Ngs said the family had never refused to cooperate with the netting proposal, but rather had requested more information from Brandt before committing to it.
“The Ng subsidiary directors have reasonably questioned whether the trustee’s proposed actions are (a) premature, (b) not yet based upon proper analysis as to what impact the proposed single netting might have on creditors or other stakeholders, and (c) outside the scope of this Court’s Intercompany settlement order,” the Ng family’s representative wrote in an objection to Brandt’s motion. “Rather than provide the requested information, the Trustee has taken the position that these requests were unreasonable, and that the debtors and the Ng subsidiary directors are, ‘for seemingly no reason,’ ‘refus[ing] to execute the necessary netting documents.” Neither of these assertions is correct.”
At the center of the issue is Brandt’s desire to move a USD 459 million (EUR 376.5 million) intercompany claim owed by one of the Peruvian subsidiaries to China Fishery International Limited, a separate branch of the larger China Fishery corporation. The Ngs claim Brandt is seeking to alter their original agreement with him that the netting of this claim would take place after a binding sale offer had been accepted for the Peruvian assets.
“It was based upon these terms that the debtors agreed to the intercompany settlement agreement and its contemplated netting, and upon which the court approved the settlement agreement,” their attorney wrote. That agreement is contingent upon their receipt of a sale price for the assets “sufficient to pay-off third-party debt and any tax payments at the target companies, in addition to administrative expense priority claims at CFG Peru Singapore.”
But currently, there is no prospective CFG Peru sale, according to the Ng family. Accordingly, the Ng family has asked that Garrity not proceed with any action in the case until Brandt answers their questions, which mainly relate to the tax implications of the netting process. The family is also requesting that Brandt provide an indemnification to the Ng subsidiary directors for executing the netting documents.
“Without an analysis of the impacts of the transaction, the debtors and the Ng subsidiary directors cannot be assured that the proposed preliminary netting transaction would not harm creditors’ claims, or violate any duties of the directors,” their attorney wrote. “It is also not unreasonable for the Ng subsidiary directors to seek indemnification in case any aggrieved creditors decide to take legal action because the preliminary netting transaction operates unfairly as between creditors.”
The Ngs claimed Brandt’s effort to remove them from their directorships is a retaliatory move.
“The trustee’s actions to seek to remove them as directors are clearly retaliatory for their refusal to allow him to autonomously control these entities. They continue to believe that their oversight is vital to these cases, and there is no basis for their removal as directors. The trustee has not alleged any misconduct, wrongdoing, or breach of fiduciary duty,” their attorney wrote. “The trustee has not submitted any applicable law supporting his proposed removal of the directors.”
The Ngs “are looking to cooperate with the trustee,” they said, but they also “honor their fiduciary duties to creditors and the debtor companies.”
“Accordingly, their actions in seeking further information before executing the assignment of the USD 459 million claim are not only justified, but also responsible,” according to the filing. “Nonetheless, it seems like this could have been easily resolved without the need for a motion."
The Ng family said a disagreement with Brandt over the financial implications of the netting agreement is not sufficient grounds to remove it from its position of control over the company.
“The Ng subsidiary directors have continuing fiduciary duties in their roles as directors of the respective entities. They take these roles very seriously, and remain committed to enhance the value of the debtors’ estates for the benefit of creditors. Because of their positions, it is sometimes necessary to ask questions and not just agree blindly with the trustee, especially if they have concerns over whether such actions are authorized, are in compliance with applicable law, rules or fiduciary duties, or otherwise in the best interest of the companies and their respective businesses, operations or creditors,” their attorney wrote. “There has been no allegation of any wrongdoing, nor any allegations of any breach of their fiduciary duties or obligations to the respective companies. Other than expressing their concerns and requesting further confirmation and analysis, the motion fails to provide any evidence of how the Ng subsidiary directors have refused to cooperate with any action of the trustee. In fact, they already did agree to the netting, but only at the time of a binding offer of sale, as agreed by the parties.”
Photo courtesy of Wikimedia Commons
