A judge presiding over China Fishery’s Chapter 11 bankruptcy filing has given his approval to a settlement agreement intended to hasten a deal for the company’s Peruvian assets.
On 16 March, U.S. Bankruptcy Court Judge James Garrity approved an agreement between FTI Consulting and William Brandt, the trustee overseeing the sale of the company’s Peruvian assets, to resolve an FTI lawsuit accusing China Fishery of engaging in fraud in its takeover of Peruvian fishmeal company Copeinca in 2013. FTI Consulting, which has sought USD 152 million (EUR 127.4 million) in the suit, will receive a USD 12 million (EUR 10.1 million) cash payout, though the agreement still must be approved by other courts with potential jurisdiction over the case.
“In order to put this matter fully to bed, we also need to get approval from the British Virgin Islands and Hong Kong courts, but we had to start with New York first,” Brandt told SeafoodSource. “Now that that has been done, we will move promptly for approval in Hong Kong and the BVI, and I expect that will take not much longer than five to six weeks and then the settlement will be final.”
Brandt called the FTI settlement a “starter’s gun” to efforts to finalize the Chapter 11 proceedings and the sale of China Fishery subsidiary Pacific Andes’ assets, which Brandt has unsuccessfully marketed for the past four years. He said the settlement would remove a major “gating” issue that had previously made potential buyers hesitate in proceeding with an acquisition.
“Once the motion was filed such that people knew there was a settlement coming, there has been all kinds of activity in the case in recognition that a path to a conclusion had become far easier,” Brandt said.
Brandt said he is in ongoing discussions with the Ng family, which controls a majority stake of China Fishery, and the Hong Kong and Shanghai Banking Corporation (HSBC), China Fishery’s primary lender, to create a path toward a resolution of remaining issues preventing a sale of the CFG Peru assets.
“I am in extensive negotiations with the Ngs and the officers and directors of the other Pacific Andes enterprises to determine, in light of the FTI settlement, whether there is any possibility of working out a ‘master’ plan which could involve the creditors, the Ngs, HSBC, and other prospective purchasers,” Brandt said. “It is the fact that negotiations right now with everybody are going very hot and heavy, so I assume there’ll be more to report in the next month or two as all of this ongoing activity may bare fruition.”
Another significant milestone in the bankruptcy case took place on 16 March, as a group China Fishery’s lenders – calling themselves the ad hoc creditor group – formally introduced their debt-for-equity restructuring proposal, which was made public earlier this month. The FTI settlement agreement improves the chance the plan will succeed, Brandt said.
“As I mentioned to the judge during my report, the existence of the FTI settlement likely enhanced the probability for a creditor plan,” he said.
In their filing, the ad hoc creditor group said that while HSBC had not yet signed onto the restructuring agreement, there had been “recent productive discussions” between the two parties.
“Ultimately, however, the support of the Chapter 11 trustee, HSBC, and/or any junior stakeholder is not necessary for creditors to continue to move this process forward,” the group said in its filing.
The group said it had decided to move forward with its own proposal, which would convert USD 700 million (EUR 581.4 million) of existing China Fishery debt into new equity, add USD 300 million (EUR 251.5 million) in new senior secured notes, and provide USD 150 million (EUR 124.6 million) in new funding to the company, after becoming frustrated with how the process had played out.
“After nearly five years of patiently waiting without receiving any distributions, it became clear that creditors will not be paid in full in cash and that the only way for CFG Peru and its subsidiaries to complete their restructuring is for creditors to agree to compromise their claims,” it wrote in its 16 March filing. “In response, the creditors began to take proactive steps to chart a path forward, including participating in a successful mediation.”
Brandt said he has been lobbied by the ad hoc group to support the measure.
“Although the creditors are putting significant pressure on me to support their plan, and I am certainly of the opinion that I absolutely want to encourage their efforts, I have not yet signed on as a sponsor of their plan, although I may do so in the near-future,” he said. “That said, the reason I have not yet signed on is that the FTI settlement is also the catalyst for a significantly renewed effort on the part of several prospective purchasers to take a further look at whether a sale of the business is now possible.”
Brandt previously told SeafoodSource three potential buyers had recently stepped forward with renewed interest in the CFG Peru assets.
Photo courtesy of Copeinca
