Pescanova's Board of Directors agreed unanimously last Friday to an agreement with majority shareholders Damm and Luxempart to back the embattled Spanish fishing giant as it struggles with massive debt and allegations of financial mismanagement.
Pescanova has been embroiled in legal trouble ever since February 2013, when the company declined to disclose details of its debt to regulators, prompting an investigation that led to the resignation of the company's CEO and the replacement of the entire board of directors. The possibilities remain open that criminal charges may be filed, and with the company in bankruptcy, shareholders and creditors have been struggling to figure out how the company may remain in operation.
The plan, expected to settle the question of Pescanova remaining in business, includes a maximum investment of USD 206.17 million (EUR 150 million) — of which the creditor bank is expected to provide 70 percent. The company presented the agreement to a Spanish court on 3 March, according to a company statement.
More information emerged from a copy of the agreement published with the National Securities Market Commission (CNMV), the Spanish financial regulating agency. According to the publication, the offer includes Damm and Luxempart as industrial partners and includes the "recognition of a participation of 4.99 percent of the existing shareholders in Pescanova after the restructuring."
Additionally, the CNMV publication indicated the offer is based on "the financial, association and operative restructuring of the Group through the creation of a company that will retain the assets currently based in Spain and incorporating the international activities of the Group." Moreover, it is explained that the society's reorganization of the group Pescanova will be done across the "merger by absorption by Pescanova of its Spanish subsidiaries, separate from Novapesca Trading's," and that will also proceed to a financial restructuring which might include insolvency for the Spanish subsidiaries.
After these processes they will proceed to the "segregation of the totality of its business and assets and liabilities in favor of a new entity, New Pescanova S.L." According to the summary of the offer of agreement for Pescanova the remaining debt after the restructuring will total to USD 1.1 billion (EUR 812.5 million), without taking into account the debt of international subsidiaries.
According to the press release it is also expected that the effective reduction of the debt in balance sheet will range between 60 and 90 percent.
Pescanova, in its statement, said the agreement "obtains the necessary support to eliminate definitively the risk of liquidation that has been weighing on the Spanish fishing multinational for more than a year."
Nevertheless, according to the Spanish media, at the moment, the offer has a support lower than 45 percent of the ordinary credits, and in order for the agreement to be approved it will have to possess more than 50 percent of the ordinary credits. The process is continuing been open one month in order that the administrator of the fishing giant, Deloitte, could request any explanation that he considers to be necessary and pave the way for the voting on the part of the creditors, as it informed the regional newspaper "Faro de Vigo."
March 10, 2014
