Friday, November 27, 2015

Carlyle's China Fishery Nearly Belly Up

Moody's downgraded Carlyle Group affiliate China Fishery for the second time in two months.  The first downgrade came in mid October.  It warned of a worsening financial situation.  That happened:

China Fishery Group Ltd. failed to repay a $31 million installment due earlier this month on a $650 million loan, according to Standard & Poor’s.
Moody's second and more dire downgrade came today.

On 26 November 2015, Pacific Andes International Holdings Limited (unrated), the parent of China Fishery, suspended trading in its shares and announced that one of the lenders of China Fishery had taken certain actions.

At the same time, Moody's notes from the auditing firm KPMG's website that Edward Middleton, Fergal Power, and Kris Beighton -- all KPMG employees -- have been appointed by the High Court of Hong Kong as joint and several provisional liquidators of China Fishery.

While the appointment of the provisional liquidators is intended to preserve the assets of the company, it also indicates that the process of debt restructuring has become more challenging.

In addition, the appointment of the provisional liquidators has triggered the acceleration of the repayment of its senior unsecured bonds due July 2019. 
Interesting that KPMG employees will liquidate China Fishery given that four KPMG senior partners were arrested for tax evasion in Ireland.

China Fishery's ownership is as follows:

China Fishery Group Limited is headquartered in Hong Kong and listed in Singapore. It is engaged in the Peruvian fishmeal and fish oil business and fishing fleet operations. China Fishery is 46.5% effectively owned by the Pacific Andes group, through Pacific Andes International Holdings Limited (PAIH, unrated), a Hong Kong-listed integrated fish and seafood products processor. The Carlyle Group, a global alternative asset management firm, holds a 6.02% stake in China Fishery Group.  
Owners have fiduciary duty to repay bonds due July 2019.

The company’s 2019 bonds were bid at 33 cents on the dollar as of 10:21 a.m. in Singapore, down 34 percent on the day, according to prices from SC Lowy Financial (HK) Ltd.
The Carlyle Group has billions in dry powder but I'll venture they let China Fishery die.

Update 6-17-19:   KPMG will pay a $50 million fine to settle SEC allegations that it not only altered past audit work, but did so after receiving stolen information from an industry watchdog.  

KMPG officials sought and obtained a list of inspection targets by the PCAOB because the firm had experienced a high rate of deficiencies. With the data, the former employees oversaw a program to revise certain audits to reduce the likelihood government inspectors would find shortfalls.