HK High Court halts China Fishery winding-up process

Singapore

SHAREHOLDERS and bondholders of beleaguered upstream fisher and fishmeal producer China Fishery Group might get a reprieve now that the Hong Kong High Court has put a halt to its liquidation process.

The latest court action, announced late Tuesday night, came after three of its lenders agreed to support the case for the company not to be wound up.

Two buyers had signed non-binding agreements on Dec 23 and Dec 24, 2015, to buy China Fishery's Peruvian business for an indicative price of US$1.7 billion.

On Dec 28, China Fishery's parent, the Pacific Andes group, entered into a deed of undertaking with three of its club loan lenders that hold a majority of borrowings. This was in order to make sure that the Peruvian business sale "is conducted in a transparent way which maximises value for all creditors concerned and the stakeholders".

Pursuant to the deed, the Pacific Andes group undertook to appoint an independent accounting firm to conduct a forensic review of the group's finances. A chief restructuring officer and a new chief financial officer also has to be appointed, and some Hong Kong properties have to be disposed of.

Said Gibson Dunn partner Robson Lee: "If you sell (the Peru business), and sell at a good price, the group might not need to go into liquidation, which is always the worst case scenario for any company."

China Fishery had suspended trading in its shares on Singapore Exchange at end-November 2015 after HSBC was successful in an application to wind up the firm. China Fishery had run into cashflow problems and failed to repay a US$31 million instalment on a US$650 million loan in November.

Late Tuesday night, Pacific Andes said the Hong Kong High Court ordered that the appointment of provisional liquidators for China Fishery be discontinued. The Hong Kong High Court also refused an appeal from HSBC.

Now, China Fishery still has to face a winding up petition to be heard in Hong Kong on Jan 27, 2016.

Ratings agency Standard and Poor's (S&P) said on Wednesday that China Fishery is still likely to miss a US$14.6 million coupon payment due on Jan 31, 2016, for the US$300 million 9.75 per cent senior unsecured notes that the company guarantees.

"In our view, China Fishery's lenders will not restart discussions on liquidity support until the courts dismiss the winding-up petitions," S&P said.

The bids by potential buyers for China Fishery's Peru business could improve the recovery prospects for the company's outstanding loans and notes, S&P said.

"However, the agreement is non-binding and the amount is subject to final negotiation. Without the Peruvian business, China Fishery has no other meaningful operations, in our opinion."