Can Pescanova avoid being shipwrecked?

In the last month and a half, the image of a solid, exemplary multinational that Pescanova had forged for itself over the course of five decades has been replaced by one of a chaotic, poorly managed and almost ruined company.

The concern was first raised when the holding company’s financial problems came to light and has morphed into real alarm as more and more breaches in the ship’s hull are appearing: the filing for creditor’s protection made by the senior management faction headed by under-fire CEO and main shareholder Manuel Fernández de Sousa-Faro (a decision not unanimously backed by its board of directors, within which an internal war is publicly raging); refinancing plans put on hold by creditor banks, stock market listing suspended; imminent cash flow problems, treasury tensions between subsidiaries; lawsuits from a group of minority shareholders and more.

As Juan José Santamaría, president of the Pontevedra Institute of Economists and Professor of Applied Economics at the University of Vigo explained to SeafoodSource, the situation is made all the more complicated “due to the lack of transparency, even with Pescanova’s own auditors. The information the company has made available to date is extremely biased and vague.”

It is this lack of transparency that has led both BDO, the company’s auditing firm, and a number of board members — including the two other main shareholders, Catalan brewery DAMM and Luxembourg investment company Luxempart — to refuse to sign off on the annual accounts, with hidden debts estimated at more than EUR 1.4 billion (USD 1.8 billion), in addition to the publicly-declared debt of EUR 1.5 billion (USD 2 billion). Spanish stock market regulator CNMV has set a 15 April deadline for Pescanova to file its accounts, although few now believe that the information supplied will be complete or — above all — trustworthy.

Is there any way the company can be saved? In Santamaría’s opinion, “the problem isn’t profitability, as the company has a market, but rather of liquidity and debt renewal. The future depends upon its directors, as there are differences between them that may be unsolvable.”

“It remains to be seen whether the company will be viable: if so, there may be layoffs, which could give some breathing space,” Santamaría said. “It would also help if it sold off its assets in some countries, maybe Chile. In a worst-case scenario, we would see the liquidation of an immense company, but I hope that doesn’t happen, as there aren’t many multinational groups in the industry or investors to whom it might be of interest.”

Whether the Galician multinational can save itself from possible bankruptcy “will to a great extent depend on the final figure for the hidden losses — one that, it would appear, is known only to Mr. Fernández de Sousa,” said Pau Morata, professor of the Marketing and Distribution Masters at the Universitat Autònoma de Barcelona’s Postgraduate School. “The key point will be how far the asset imbalance will permit a medium and long-term way out from the current situation of creditors’ protection, with strong write-offs by creditors and huge losses for shareholders, some of whom appear to have accepted that their investment will end up worthless.”

Morata told SeafoodSource, “The process is complex because it is a holding of companies, some of which are viable and others not. Some of the wealthier shareholders could save Pescanova but, to make a decision, they will have to assess the scope of the losses and put a value on the income and financial expenses.”


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