Chile’s Nova Austral moots rescue package

Struggling Chilean salmon farmer Nova Austral is proposing a major financial shake-up to help get it out of its troubles.

The company, which filed for bankruptcy protection during the summer, is reported to owe almost US $560m (£461m). Much of that debt is held by just two creditors.

Nova Austral said, in a report to the Oslo Stock Exchange, that the purpose of the proposed reorganisation agreement is, in general terms:

• To restructure the company’s debt through the granting of new conditions for the payment of the remaining credits subject to the reorganisation agreement;
• To search for investors who are able to provide working capital.
• To preserve the company’s line of business.

A creditors meeting is scheduled for tomorrow (Thursday).

How the problems piled up

Nova Austral describes itself as a leading player in the production and processing of high-quality salmon within the Chilean salmon industry, operating in the Magallanes and Chilean Antarctica Region for more than 15 years.

It says its location in the southernmost area of Chile provides optimal conditions for growing salmon to the highest standards. Nearly 3,000 direct and indirect workers and their families depend on the company, which positions Nova Austral as a key economic player for Magallanes and, especially, for the district of Porvenir, where it is the main employer.

The report adds: “Notwithstanding its relevance in the southern part of the country, Nova Austral’s performance has been momentarily affected by a series of factors and exceptional situations that have prevented the normal development of its business, as well as the fulfilment of its projections and commitments with its creditors.”

The company cited:

• Tightening of the auditing standards of government agencies;
• Revocation of three concessions that together represent approximately 20% of the production capacity;
• Suspension of concessions; and
• Lack of recognition of the company’s operational improvements.

The report continues: “In order to continue operating and thus avoid affecting thousands of families in the region who depend on Nova Austral for their livelihood, the shareholders made a great effort to evaluate options, seek financing alternatives and propose agreements to its various creditors in order to overcome the temporary complication that Nova Austral is going through.

“However, it was not possible to channel the various positions and interests at stake to reach a global agreement that would allow restructuring the purely financial debts and ensure the company’s operational continuity.

“Consequently, the company took the decision to initiate the present proceeding as the best alternative to achieve an agreement that will allow it to continue developing its business, as well as to fulfilling its commitments to its creditors, its community and its workers.”

Options for the deal

Nova Austral has set out three alternative approaches for the restructuring arrangement:

A: All outstanding amounts under the existing secured bonds of the company will be discharged in full. This includes the 50% discharge of all credits under the existing secured revolving credit facilities and the establishment of a working capital financing of between $15m (£12.4m) and $23m (£18.9m) where the bondholders will have preferential right to participate.

B: No immediate discharge of any debt, but the secured debt of the Company will be rescheduled and paid in a single instalment on the earlier of (i) 30 September 2024 or (ii) the date on which the shares of the Company have been sold, and will not accrue any interest

C: 1. All outstanding amounts under the existing secured bonds of the Company will be discharged in full. 2. The bondholders will be given the preferential right to participate in a capital increase of new shares for up to a total amount of $7.5m (£6.17m), which if fully subscribed will represent an aggregate shareholding of 49%.