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Pacific Andes files in US as Singapore court puts end to global moratorium

30 September 2016

Pacific Andes files in US as Singapore court puts end to global moratorium iStockphoto.com/AlbyDeTweede

Global industrial fishing group Pacific Andes has dropped its Singaporean scheme and filed for Chapter 11 in the US after a Singapore court declined to extend a global moratorium for the company and its subsidiaries, leading creditors to file winding-up petitions in Bermuda and the BVI.

release issued on 30 September to the Singapore Stock Exchange by group holding company Pacific Andes Resources Development announces that the company has filed a Chapter 11 proceeding in New York to lock down its assets.

The release explains that, within hours of the Singaporean court issuing an oral judgment on 26 September, creditors Maybank, Rabobank and Bank of America filed a petition for the appointment of a liquidator to wind up the group holding company in the Supreme Court of Bermuda.

On the same day, Bank of America also filed a petition in the BVI Eastern Caribbean Supreme Court to wind up two group subsidiaries.

Accusing the creditors of “exploiting” the Singapore court’s findings before it had issued written reasons “contrary to the spirit” of the judgment, Pacific Andes decided to drop its Singapore proceedings and file for Chapter 11 protection instead on 29 September.

“The lenders have rendered it impossible to achieve an effective restructuring in Singapore,” Pacific Andes argues in the release. “This has left the Company with no realistic option but to instruct its lawyers to withdraw from the Singapore proceedings (…) prior to filing under Chapter 11.”

Pacific Andes says the Chapter 11 filing was made on an expedited basis since a hearing was scheduled in Bermuda for 30 September. A hearing in the BVI court was also due to go ahead on 7 November.

The stock exchange release appears to say the group has already been granted protection by the New York bankruptcy court, but the court docket did not ontain an entry to that effect by the time GRR went to press: “PARD has obtained Chapter 11 protection against the precipitous actions of bank creditors which would have destroyed value for the majority of creditors and stakeholders,” the release says.

The lifting of the moratoriums

Judicial Commissioner Kannan Ramesh in the Singapore High Court issued his written reasoning for scaling back the moratoriums just a day after the oral ruling, on 27 September.

In the decision, the court agreed to extend the group holding company’s protection only in the territory of Singapore until mid-October, but refused to extend protection previously offered to three subsidiaries incorporated in the BVI and Hong Kong.

It originally agreed to protect Pacific Andes and the three subsidiaries, which make up its frozen fish business, in August, on an interim basis. Pacific Andes made the application on behalf of the subsidiaries under section 210(10) of the Singapore Companies Act, to protect the whole group while it aimed to finalise a scheme of arrangement.

Reviewing the interim moratoriums, the court noted that while the holding company was BVI-registered, its shares were traded on the Singaporean stock exchange and it conducted business within the city state. The subsidiaries, however, did “not appear to have any business activity or assets […] of any significance” in Singapore.

Though the court found that being centred outside of Singapore was “not in and of itself a bar to the court exercising jurisdiction,” to grant relief to the subsidiaries was to “interfere with the jurisdiction of another court and not recognise the principle of comity.” 

Judicial Commissioner Ramesh next considered the moratorium for the group holding company and found that a Singaporean scheme of arrangement is typically territorial in nature, and that section 210(10) of the Companies Act should have no power to restrain foreign proceedings in that context.

Bank of America argued in the proceedings that since the various debts of the subsidiaries were governed by Hong Kong and English law, the court could not assume jurisdiction over the applications. Judicial Commissioner Ramesh disagreed, asserting that a sufficient presence in Singapore justifies jurisdiction even when debts are foreign-governed.

“If the applicants are comfortable restructuring debts governed by Hong Kong law and English law under a Singapore scheme, I see no reason why the court should be slow to assume jurisdiction provided it had subject matter jurisdiction and there exists a sufficient nexus to exercise that jurisdiction,” he said.

Maybank also argued that protecting the company while it formulated a restructuring plan was “futile”, since the creditors were bound to reject the plan when the time came to vote.

Judicial Commissioner Ramesh also dismissed this point, stating that creditors are “prone to change their position based on their commercial motivations”, and that assessing creditor support at this point would be “premature”.

Meanwhile, in the US

Pacific Andes’ Chapter 11 case has been assigned to Judge James Garrity in New York, the same judge overseeing the Chapter 11 proceedings of its major subsidiary, China Fishery Group; three consolidated Chapter 15 applications filed by Peruvian entities in the group; and four new Chapter 15 applications by German group entities - also seeking consolidation - filed on 22 September.

The German group entities are seeking recognition in the US of insolvency proceedings already pending before a court in Lüneberg, Germany.

Judge Garrity is still deliberating on whether or not to appoint a Chapter 11 trustee to administer China Fishery’s bankruptcy and seize control of the company’s assets.

The decision to appoint a trustee is supported by China Fishery’s major lenders, led by HSBC, who are looking to wrest control of the company’s assets from its controlling family, the Ngs. As previously reported, lenders accuse the Ngs of putting off the sale of the company’s Peruvian fishmeal business.

The Peruvian business is Pacific Andes’ most valuable asset, accounting for well over half of its annual turnover. The sale would provide sufficient funds to repay the financiers. 

 

In the High Court of Singapore

Pacific Andes Resources Development Ltd and other matters [2016] SGHC 210

  • Judge Kannan Ramesh

Counsel to Pacific Andes Resources Development

  • Drew & Napier

Partners Cavinder Bull SC and Blossom Hing with associates Mohan Gopalan, Teri Cheng and ChanWei Meng in Singapore

Counsel to Bank of America

  • TSMP Law Corporation

Partner Thio Shen Yi with associates Alexander Pang, Evan Ng and Pamela Chan in Singapore

Counsel to Sahara Investment Group

  • Tan Rajah & Cheah

Partners Chalva Raja SC and Zara Chan, with associate Megan Chia in Singapore

 

 

In the US Bankruptcy Court for the Southern District of New York

  • Justice James Garrity

Counsel to Pacific Andes Resources Development

  • Klestadt Winters Jureller Southard & Stevens

Partner Tracy Klastadt in New York

Counsel to the creditor group

  • DLA Piper

Partners Craig Martin in New York and Richard Chesley in Chicago, acting for the group.

  • Sidley Austin

Partner Lee Stein Attanasio in New York, acting for Bank of America.

  • Mayer, Brown, Rowe & Maw LLP 

Partner Frederick D Hyman in New York, acting for Malayan Banking Berhad.

  • Luskin, Stern & Eisler

Partner Michael Luskin in New York, acting for Coӧperatieve Rabobank.

Counsel to China Fishery/Pacific Andes International Holdings subsidiaries in Chapter 11 proceedings

  • Meyer Suozzi English & Klein

Partners Howard Kleinberg and Jil Mazer-Marino in New York

Counsel to Peruvian companies CFG Investment, Corporacion Pesquera Inca and Sustainable Fishing Resources in Chapter 15 proceedings

  • Meyer Suozzi English & Klein

Partner Edward LoBello in New York

In the proceedings under Peruvian law

Counsel to Counsel to CFG Investment, Corporacion Pesquera Inca and Sustainable Fishing Resources

  • Estudio Rebaza Alcazar & De Las Casas

Partner Gonzalo De Las Casas in Lima