Pescanova SA shareholders plan to ask lenders to accept a loss of at least 75 percent on their loans to salvage the Spanish fish producer that filed for bankruptcy protection in April.
Banks headed by Banco de Sabadell SA and NCG Banco SA will be offered an equity stake in exchange for accepting the writedown, Juan Manuel Urgoiti, the preferred candidate of Corp. Economica Damm SA and Luxempart SA to become non-executive chairman of Pescanova, said in an interview. Shareholders are scheduled to vote on the proposal at a meeting on Sept. 12. Urgoiti said he has been pledged more than 30 percent of investors’ votes.
“It’s time for great sacrifices and those sacrifices have to be shared out equally,” Urgoiti said. “But it also has to be done in a way that generates confidence in the market.”
Pescanova sought protection from its creditors after uncovering more than 2 billion euros ($2.7 billion) of debt in off balance-sheet financing units. Former Chairman Manuel Fernandez de Sousa-Faro is being investigated for fraud over the losses and was this month ordered to provide guarantees worth about 180 million euros to cover his liabilities.
Deloitte, Pescanova’s court-appointed administrator, will recommend that the company be restructured rather than liquidated because the underlying business remains profitable, Urgoiti said. Deloitte is due to publish its report imminently, he said.
Glass Lewis & Co and ISS Proxy Advisory Services, which advise institutional investors on how to vote their shares, also recommend endorsing Urgoiti as chairman.
Urgoiti said investors would have less confidence in Pescanova if the banks wiped out the existing investors and took over all of the company because that would create a conflict with the banks figuring as both equity and debt investors.
The more than 100 banks owed more than 3 billion euros by Pescanova may accept the proposed losses because under Spanish law they have to write down the entire value of their loans by December, Urgoiti said. The company will be financially viable with less than 1 billion euros in debt, he said.
Urgoiti is a veteran banker who serves on the executive committee of Inditex SA, Spain’s largest company, and helped negotiate Lee Iacocca’s rescue of Chrysler in 1979 when he worked at Banco Vizcaya.
Urgoiti said he’d been given support for his plan by the government ministers as well as the regional leader of Galicia where much of Pescanova’s 10,000-strong workforce is based.
“The company doesn’t need to cut jobs because the industrial side works very well,” Urgoiti said.