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April 23, 2021 – The Court hearing the China Fishery Group Limited cases issued an order approving (i) proposed bidding procedure for the sale of substantially all of Debtor CFG Peru Singapore’s equity interests in CFGI (the “CFGI Equity Interests” and the “Sale,” respectively) and (ii) an auction/sale timetable culminating in a May 7, 2021 auction and a May 13, 2021 sale hearing [Docket No. 2443].
The proposed section 363 auction/sale process for the Debtors' Peruvian anchovy "crown jewels," reflects an agreement between (i) the "Creditor Plan Proponents" (Burlington Loan Management DAC and Monarch Alternative Capital LP, solely on behalf of certain advisory clients and related Entities that hold Claims) and (ii) the Chapter 11 Trustee assigned to the Debtors' cases to properly market test the value of the CFGI Equity Interests; with the Chapter 11 Trustee agreeing to drop its longstanding Plan objections allow the Creditor Plan Proponents to proceed with their Plan in the event that sale efforts do not generate the $995.0mn (net of cash) proceeds sufficient to make prepetition holders of the "Club Loan sand Notes" whole (the "Sale Threshold").
In addition to the $995.0mn opening mark for any qualified bids, bidding procedures include a $5.0mn minimum bid increment, with this amount keyed off of the baseline bid chosen by the Chapter 11 Trustee as the best of qualifying bids (if any).
On April 23rd, the Court hearing the China Fishery Group Limited cases issued an order approving (i) the Creditor Plan Proponents’ Disclosure Statement (filed on April 21st), (ii) proposed Plan solicitation and voting procedures and (iii) a proposed timetable culminating in a June 29th Plan confirmation hearing [Docket No. 2441].
Specifically, the Disclosure Statement provides, "The Chapter 11 Trustee intends to run a final formal bidding process for the sale of the CFGI equity interests. If a qualified bidder comes forward at a price sufficient to satisfy, inter alia, the Senior Notes Claims and Club Facility Lenders, the Creditor Plan Proponents will no longer seek confirmation of this Plan by the Bankruptcy Court. In such circumstances, Senior Notes Claims and Club Facility Lenders, as well as certain other Claims, would be paid in full in cash at closing."
If, however, the Sale Treshold is not reached (and a qialified bidder is not named), "the Chapter 11 Trustee would be supportive of pursuing the Creditor Plan Proponents’ Plan ….”
The Chapter 11 Trustee's bidding procedures motion [Docket No. 2409] reads, “The Debtor’s estate, and the estates of all Debtors in the above-captioned chapter 11 cases, are comprised almost entirely of their interests in two Peruvian operating companies, which are non-Debtor subsidiaries — CFG Investments S.A.C. (‘CFGI’) and Corporacion Pesquera Inca S.A.C. (‘Copeinca,’ and together with CFGI, the ‘Peruvian Opcos’). Together, CFGI and Copeinca operate the anchovy fishing business of the Pacific Andes Group (defined below) and control a significant percentage of the anchovy fishing quotas fixed by the Peruvian government. The Peruvian Opcos have repeatedly been acknowledged to be the ‘crown jewels’ of these chapter 11 cases.
The Creditor Plan Proponents have filed the Creditor Plan Proponents’ Plan (each as defined below) that provides for the equity of the Peruvian Opcos to be distributed to the holders of the Club Loans and Notes in exchange for their debt [we cover the Creditor Plan Proponents' Plan separately]. While the Chapter 11 Trustee is generally supportive of the Creditor Plan Proponents’ Plan and sees it as a positive development in this case, the Chapter 11 Trustee believes an attempt must be made to set a bid deadline to ensure there is neither a cash buyer for the CFGI Equity Interests nor additional value beyond the debt.
For purposes of the sale structure, the Chapter 11 Trustee seeks to sell the CFGI Equity Interests, which are CFG Peru Singapore’s direct equity interest in CFGI and indirect equity interests in several non-Debtor subsidiaries of CFGI, namely Copeinca. Given the potential renewed interest in the sale of the CFGI Equity Interests in light of recent developments discussed more fully below, the Chapter 11 Trustee believes that entry of the proposed Bidding Procedures will expedite the proposed bidding process (the ‘Sale Process’). The Bidding Procedures will provide the formal framework for the Sale Process, which has been designed to elicit value-maximizing bids for the CFGI Equity Interests.
Among other things, the Bidding Procedures (i) set forth the timeline for the Sale Process that is reasonable and appropriate to elicit value-maximizing bids for the CFGI Equity Interests and (ii) set forth the basic rules for submitting bids for the CFGI Equity Interests and the date for a potential Auction. The proposed Bidding Procedures comply with the requirements of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules and the Sale Guidelines and therefore should be approved.”
The motion further provides, “There have been significant positive developments achieved in these cases through the Chapter 11 Trustee’s efforts. First the Chapter 11 Trustee has achieved a settlement of the $156 million Hong Kong litigation that was brought by the provisional liquidators appointed to certain non-debtor Pacific Andes Group subsidiaries (the ‘FTI Liquidators’), clearing up concerns that a significant liability against CFGI might materialize and remain an obligation of the buyer.
Significantly also, the Chapter 11 Trustee and the Other Debtors have reached an agreement in principle to obtain various consents and approvals from the Other Debtors that are critical to any sale or restructuring transaction at the CFG Peru Singapore level. This agreement will not only pave the way for a smooth implementation of a transaction involving the assets of CFG Peru Singapore, which purchasers and creditors had expressed concerns about previously, but will facilitate the emergence of the Other Debtors from chapter 11 as well.
In light of the foregoing, and the successful resolution of several other significant obstacles standing in the way of a sale, the Chapter 11 Trustee seeks authority to pursue a final limited bidding process. Thereafter, the Chapter 11 Trustee would be supportive of pursuing the Creditor Plan Proponents’ Plan if no Qualified Bidder emerges.”
If qualified bids are ultimately received, the proposed bidding procedures would set the minimum overbid amount at $5.0mn.
- Bid Deadline: June 25, 2021
- Auction: June 28, 2021
- Sale Hearing: July 15, 2021
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