Pacific Andes Enters Bankruptcy Blaming El Nino, Lender Acts

  • Says HSBC appointed liquidators who interfered with business
  • Twelfth-largest seafood processor operates in China, Peru

Pacific Andes Group, the world’s 12th-largest seafood company, filed for bankruptcy in New York after investigations by Singapore and Hong Kong market regulators and pressure by lenders to start a fire-sale.

The company’s liquidity crisis was triggered by the El Nino weather pattern and the depleted Peruvian anchovy stocks that resulted, as well as “aggressive and improper acts by certain lenders,” Chief Executive Officer Ng Puay Yee said in court filings. While 16 units filed for court protection, others aren’t in bankruptcy, according to the filings, which listed $4.7 billion in assets and $2.5 billion in debt as of March 28, 2015.

Pacific Andes affiliate China Fishery Group said in August that Singapore’s monetary authority and commercial crime unit were investigating an offense under the city-state’s securities laws. Market regulators in Hong Kong also obtained documents from Pacific Andes International Holdings Ltd.

The bankruptcy process will give the various affiliates a “breathing spell” and stop lenders from forcing an immediate liquidation, the CEO said in court papers.

Shrimp Exporter

Pacific Andes began in 1986 as a small frozen-seafood trading business in Hong Kong that exported shrimp, squid and scallops to the U.S. and Europe. It went public and bought a stake in the industrial fishing business CF Group in 2004, according to court papers. CF Group’s units have an anchovy fishery in Peru, mackerel harvests and one of the world’s largest fishmeal and fish oil businesses. Today Pacific Andes has one of the biggest fish-fillet processing centers in the world, in Qingdao, China, according to its court filings.

While under bankruptcy court protection, the company can keep creditors and bondholders from seizing its assets, primarily the fishery business in Peru acquired from Oslo-based Copeinca ASA in 2013. China Fishery said efforts this year to sell the Peru assets weren’t successful amid enforcement threats from some creditors. It received two undisclosed proposals in December that valued the business at $1.7 billion.

Its corporate structure has also complicated matters, according to court papers, which list six holding companies and several non-operating units that used to provide freight service or trade in frozen seafood. A small group of lenders became hostile to pre-bankruptcy sale efforts and has tried to force an expedited sale, the company said in court papers.

Debt Breakdown

Twenty-one major forms of debt are listed in the filings, including $300 million in 9.75 percent senior notes due 2019, and a $650 million “Club Facility” with Rabobank International, HSBC Holdings Plc and other banks.

Relations with HSBC, previously its primary bank, soured in 2014 when the lender said it didn’t believe the company could support its debt, Ng said. At the bank’s request, it paid off $102 million under the Club Facility loan, but difficulties continued, as the bank pressed to be repaid in full, she said.

Trouble intensified in November, when HSBC petitioned for liquidators to be appointed over two units of the company, Ng said in the filing. While it was later found by a court that HSBC hadn’t submitted credible evidence for their appointment, the liquidators confiscated company computers, met with vendors and investors, and interfered with its business “with total disregard” of local laws, the CEO said. By the time the liquidators were discharged, creditors and banks questioned the viability of the company, leading to further problems, she said.

Tala Jahangiri, an HSBC spokeswoman, had no immediate comment on the filing.

Massachusetts, Germany

The company’s businesses also include a 60 percent interest in Massachusetts-based National Fish & Seafood Inc. and a 19 percent stake in the holding company for Pickenpack Germany Group, which produces frozen seafood.

The $300 million of China Fishery notes due in July 2019 fell 0.2 cent to 63.85 cents on the dollar as of 12 p.m. in Singapore, according to Bloomberg-compiled prices. While the notes have gained about 15 cents on the dollar this year, they are still 34 cents lower than the level traded a year ago. The company defaulted on Feb. 29 after a one-month grace period expired, according to data compiled by Bloomberg.

Singapore-listed Pacific Andes Resources, which owns about 69 percent of China Fishery, also defaulted on S$200 million ($149 million) of 2017 notes in January, one of two defaults in Singapore debt market since 2009. The notes are currently at 20 cents on the dollar, according to Bloomberg prices.

The bankruptcy followed failed negotiations with Bank of America Corp. and HSBC to extend a January agreement with the lenders to end their legal actions. The agreement automatically expires on July 15, the company said.

The case is China Fishery Group Limited (Cayman), 16-11895, U.S. Bankruptcy Court, Southern District of New York. (Manhattan).

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