Bloomberg News

China Fishery Takes Extra Month to Win Copeinca Bondholder Deal

August 21, 2014

China Fishery Group Ltd. (CFG), the Singapore-based anchovy seller facing credit-rating downgrades, extended an effort to change bond terms at its Peruvian unit amid analyst predictions the deal won’t win over investors.

Corporacion Pesquera Inca SAC, the Lima-based unit known as Copeinca, pushed the deadline for bondholder approval of the offer to Sept. 18, according to a statement on the website at consent tabulation agent D.F. King & Co. The solicitation had been set for expiration today, after delaying the initial deadline from July 30.

China Fishery is seeking bondholder approval to use the Peruvian unit to guarantee as much as $1.2 billion of obligations of the corporate group, including $650 million of credit lines, $300 million of bonds due in July 2019 and future borrowings, company filings show. While the deal would bring special fees for Copeinca bondholders, they may not be enough to win approval, according to BCP Securities LLC.

“They’re just extending it and hoping for the best,” Mariela Anguiano, an analyst at BCP in Greenwich, Connecticut, said by phone today. “We continue to believe that it will be difficult for them to get the consent if they don’t sweeten the deal.”

To relax the terms, the company needs majority approval from holders of Copeinca’s $250 million notes due February 2017, according to a July 17 consent solicitation document.

Last week, Standard & Poor’s cut its ratings on China Fishery and Copeinca by one level to B, or five steps below investment grade, and put them on negative watch because of the risk debt can’t be refinanced. Moody’s Investors Service said last month it will review its B2 rating if the consent process fails.

Anchovy Quota

China Fishery officials didn’t immediately return e-mails and calls made outside of working hours for the Singapore-listed group. Calls to Copeinca’s main number weren’t answered.

China Fishery spent more than $782 million taking over Copeinca last year, giving it control of the biggest anchovy quota-holder in Peru and the world’s third-largest fishmeal producer. The purchase was partly funded by loans that lenders now say must be guaranteed by Copeinca, according to S&P.

With some $2.5 billion of assets at the end of March, Copeinca accounted for at least 90 percent of the group’s total assets and earnings, company filings show.

“That’s a lot of additional debt for Copeinca bondholders to share with other group creditors,” Charles Macgregor, the Singapore-based head of Asia at Lucror Analytics Pte, an independent credit-research company, said before the extension was announced. “This is a credit that continues to surprise on the downside.”

Bonds Fall

Copeinca bondholders are being offered $10 for every $1,000 in face value of bonds held, or 1 cent on the dollar, as an incentive to consent to the covenant changes. If the minimum number, or 50.1 percent, of bondholders agree, that will cost the company $1.25 million.

The yield on China Fishery’s 9.75 percent 2019 notes has risen 7 basis points this week to 10.576 percent as of yesterday, Bloomberg-compiled prices show.

The yield on Copeinca’s 2017 bonds rose 19 basis points to 11.1 percent today at 2:52 p.m. in New York, reaching the highest in five months.

Worst-Case

China Fishery signed a four-year credit facility for $650 million in March with China CITIC Bank International Ltd., Rabobank International, DBS Bank Ltd., Standard Chartered Plc and HSBC Holdings Plc, according to the March 24 statement.

Proceeds were to be used to redeem Copeinca’s 2017 notes, acquire the rest of the shares in Copeinca it didn’t already own, repay some debt and for general corporate purposes. The bond buyback plan was scrapped in May, according to a May 23 notice to bondholders obtained by Bloomberg News.

“The worst-case scenario, if they can’t get the consent from Copeinca bondholders, is a technical default on the loans, and the banks will probably give them a temporary waiver,” Annisa Lee, a credit analyst in Hong Kong at Nomura Holdings Inc., said by phone on Aug. 20. “The other alternative is for them to call the Copeinca bonds.”

To contact the reporter on this story: Christine Jenkins in Bogota at cjenkins28@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Bradley Keoun, Rita Nazareth


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