China Fishery Chapter 11 trustee to announce stalking-horse bid “fairly soon”, aims to complete sale in 1H18 — Clarification

07 November 2017

[The headline and third paragraph of this report have been clarified to state, as per William Brandt, the trustee for CFG's Peruvian assets, that he expects to complete the assets' sales in, rather than before, 1H18. The rest of the article remains the same.]

 

The Chapter 11 trustee for China Fishery Group’s (CFG) Peruvian assets will “fairly soon” announce a stalking-horse bid sufficient to cover the around USD 900m claims arising from CFG’s club loan and bonds, trustee William Brandt told Debtwire yesterday (6 November).

 

The trustee is aiming to close the sale of CFG’s crown jewel Peruvian assets around February, said two sources familiar.

 

“It could be February, March or April,” barring delays due to holidays, the US bankruptcy court’s schedule and the complexity of the deal, Brandt told Debtwire. In any case, he expects to complete the deal in 1H18.

 

After announcing the stalking-horse bid, Brandt plans to get the court approval for the sale in around 30 days. During that period, the Ng family or any other parties can come up with their competing bids by making USD 120m-USD 150m deposits, Brandt said. Apart from meeting the sale threshold, the bidders would need to match the timeline as well, he said.

 

During the meetings, the trustee said the post-Chapter 11-filing interest accruals are being tallied at the respective “contractual rates”, according to the two sources familiar and a third source familiar.

 

The meetings followed a notice the trustee filed in the US Bankruptcy Court for the Southern District of New York last Thursday (2 November), setting a minimum sale threshold of USD 1.2bn for CFG’s Peruvian assets. That is at a higher level than the USD 1.15bn minimum reserve price CFG’s controlling Ng family set in its restructuring plan filed to the court on 29 September.

 

The estimated carrying value of claims related to the 9.75% bonds is USD 492m, while it is USD 371m for the club loan claims at the unspecified effective date, according to the disclosure statement CFG filed on 29 September. That translates into 117.6 cents on the dollar principal for the loans and 123.6 cents for the bonds.

 

The ultimate payment to be made could be higher if the settlement drags on, as well as to cover advisory fees, said Brandt and one of the sources familiar.

 

Brandt did not explain his plans in case he fails to get a minimum-USD 1.2bn stalking-horse bid, said all the sources familiar. Brandt told this newswire that he continues to be in touch with the potential bidders and is “heartened” by their interest.

 

Two-pronged

 

During the meetings, Brandt downplayed the possibility of the Ng family’s Chapter 11 plan panning out, especially because of the hurdles in finding new equity, said all three sources familiar.

 

Under the plan submitted by CFG and its parent Pacific Andes Resources Development (PARD) on 29 September, the obligations of the two companies are to be funded by a USD 255m investment by a plan sponsor in exchange for a 50.5% stake of reorganized China Fishery Group Ltd (Cayman); and a USD 625m exit credit facility or a sale of the Peruvian entities for a price of more than USD 1.15bn.

 

The Ng family intends to restructure the two entities into one group, if the sale of the Peruvian assets fetch lower than the USD 1.15bn minimum reserve price.

 

As of now, it is still unclear who would provide the USD 625m exit facility, said the second and third sources.

 

Given the likelihood of the Peruvian sale fetching more than the Ngs’ reserve price, the sponsor’s plan seems very unlikely now, said the second and third sources.

 

In the meetings, Brandt, whose current remit is intermediate holding company CFG Peru Investments Pte Ltd (Singapore), also said he is not moving up the corporate structure to become the trustee of CFG partly because of the complexity of the issues, said all the sources familiar. As a result, Brandt would need endorsement from CFG’s board for the sale, they added.

 

Brandt is confident of getting the approval, and does not believe the Ngs would meddle in the process, he said. As reported, Brandt in July told some bondholders that he wanted to move up to become the trustee of CFG to prevent the Ng family from potentially impeding the sale of the Peruvian assets.

 

As reported by Debtwire in late July, before emerging with the reorganization plan, CFG mulled a restructuring proposal under which then-putative white knight Avenue Capital would purchase about half of the company’s approximately USD 860m debt in exchange for a 50% stake in intermediate holdco Smart Group.

 

Under the plan, Avenue Capital would have used USD 405m in cash to purchase an approximately same amount of CFG debt via a reverse Dutch auction, with the remaining USD 455m exchanged into new debt – most likely in the form of new bonds, as reported.

 

Brandt is in Singapore today where he was scheduled to meet this morning with holders of PARD’s SGD 200m unsecured, 8.5% due 2017 notes, according to two holders of the issue. He is also to meet with FTI Consulting, the liquidator for China Fishery group companies or related parties in the BVI and in Hong Kong, two other sources with knowledge of the matter said. The Trustee is also to meet with Allen & Gledhill, his legal counsel regarding Singapore law, they said.

 

CFG’s due-2019 notes were indicated at 105.5/107 this morning, said a dealer.

 

CLICK HERE for the CFG/PARD Chapter 11 plan and disclosure statement.
CLICK HERE for Pacific Andes International Holdings’ plan.
CLICK HERE to view all CFG Chapter 11 filings in Debtwire Dockets.