In troubled waters
The Ng family, which traces its roots to Melaka but is now based in Hong Kong, is at odds with an array of international bankers seeking to recover some US$1.7bil (RM6.58bil) through exposure to China Fishery. At least one banker has lost his job. Others
Ng Joo Siang built a global fishing empire from Hong Kong that is now mired in debt with an array of global banks fighting to recover loans amounting to US$1.7bil. The episode has cost at least one banker his job. The saga traces back to fish markets in Melaka where the Ng family first honed their skills.
A COMPANY that learnt the trade of industrial fishing from its humble beginnings in Melaka is now at odds with a fleet of bankers stretching from Malaysia to Singapore and London on how best to resolve a massive US$1.7bil (RM6.58bil) debt problem.
The entire fiasco has cost at least one prominent banker his job and many others severe reprimands, demotions. It has drawn scrutiny on the due diligence process that banks conduct on family-owned companies and the difficulty in separating the assets of the owners and the listed companies.
“Bankers who are seen to be close to the Ng family have lost their jobs,” says a source.
“The web of companies and the inter-company loans under the Pacific Andes International Holdings (PAIH) makes the restructuring exercise difficult. Nobody can put a finger as to how much the value of the assets are and how big the debt is,” the source adds.
At the top of the group’s structure lies NS Hong Investment Ltd, the family company of Ng Joo Siang who is the main figure behind PAIH and its subsidiary China Fishery Group Ltd.
NS Hong has its domicile in British Virgin Islands and through PAIH and its listed companies have industrial fishing operations from Russia to Africa and South America.
PAIH is listed in Hong Kong and it controls China Fishery through Pacific Andes Resources Development (PARD). Both China Fishery and PARD are listed on the Singapore Exchange and have been suspended since November 2015.
“Increasingly, it looks like the founding Ng family are the likely ones who would be able to unravel the web of companies and inter-company loans tied to China Fishery and PAIH.
“The biggest concern for prospective buyers are buying the asset without realising the depth of the problems,” says an executive familiar with the developments involving one of world’s largest industrial fishing company.
For instance, China Fishery, which owns the rights to fishing in Peru and Chile and said to be the most valuable asset of the group, was supposed to be sold in December last year. The trustees given the mandate to handle the sale postponed the disposal exercise due to delays caused by “too many holidays in Peru and Asia” that has resulted in less parties looking at the asset.
The trustee was supposed to hold an auction on Dec 13 last year but now the sale has been postponed indefinitely.
The US Courts appointed a trustee to oversee the sale of China Fishery in 2016 after PAIH sought protection from creditors by filing for Chapter 11 bankruptcy in June of that year.
The US court allowed the Ng family to restructure the PAIH group but gave the mandate on China Fishery to a trustee, William J. Brandt Jr, because it was the most valuable asset of the group and bankers wanted a third party to handle its sale.
China Fishery in Peru is no small fishing company. It is an industrial fishing entity with plants processing fishmeal on board vessels and one canning factory. It owns about 50 fishing vessels har- vesting anchovy, mackerel and jack mackerel.
“Bankers thought PAIH and China Fishery were traders of fish and other resources from the sea and hence there is minimal risk. But the company is more than that. It is an industrial fishing company and its credit worthiness depends on the fishing operations of its vessels and fishing rights it gets from countries such as Russia, Peru and Chile,” says a fishing industry executive.
China Fishery’s asset in Peru is tagged at a valuation of US$1.2bil. However, Peru has reduced the fishing quota for this year and it has impacted the value of China Fishery. It has been reported that a more realistic price for China Fishery is US$800mil.
“The Ng family grossly overpaid to buy the assets in Peru in 2013,” says the executive.
How the problem started – Russian connection
On paper, the troubles for the Ngs and PAIH started in November 2015 when HSBC filed a petition in Hong Kong to wind up China Fishery after it failed to settle loans due to banks and the companies came under investigations from the authorities in Singapore.
However, executives say the problems for PAIH and China Fishery started in the second quarter of 2014 when the United States imposed sanctions on Russia. Before the sanctions came into place, PAIH’s operations in Russia had already come under the scrutiny of the Russian authorities.
It is learnt that PAIH operated in Russia through friendly parties that were known to Joo Siang. PAIH gave these nominees financial advances in return for supply of fish. That was the working arrangement.
The supply from Russia was to go to Europe and the rest of the world.
“The sanctions disrupted PAIH’s operations in Russia. That was the start of the problems for Joo Siang and the group,” says an executive.
The problems in Russia came several months after China Fishery bought Copeinca, Peru’s second-largest fishing company, for US$800mil. The acquisition, done in 2013, is said to be pricey and it added to the group’s woes. China Fishery had taken up debts to acquire Copeinca and ]had to undertake a rights issue in 2015 to settle a USS250mil borrowing, which carried a high interest cost of 9% per annum. In June 2015, Joo Siang was reported m have said that the company had sta-bilised and settled its problems with Russia and paid off high-cost debts taken in relation to the purchase of China Fishery. However, the series of rights issues undertaken by the PAIH group had prompted HISBC to start its own investigation on tihe utilisation of the proceeds of the fund raising. "The bank started its; investigations after the group embarked on several rights issues," says the executive. It was reported that HSBC, in its investigation done through a third party, found some questionable irregu-larities on the flow of funds within the group and companies belonging to the Ng family. The Ng family has vehement-ly denied any wrong-doing. Subsequently in November 2015, HSBC filed a suit to wind up and appoint provisional liquidators for PAIH in Hong Kong. In that same month. PARD and Chinia Fishery-both listed in Singapore - asked for exten-sion of time to release i their annual report. Also in November, HISBC filed a suit to wind up China Fishery in Singapore. "HSBC initially told other lender banks to join its efforts. But none of the lender banks wanted to pull the plug out of PATH and China Fishery then. Now all the banks have taken
legal suits against PAIH and China Fishery,” says a banking executive familiar with the case.
The Ngs fight back
The blow to bankers came in June 2016 when the group filed for protection against bankruptcy under Chapter 11 in the United States. Under Chapter 11, the family has time to restructure the debts at its pace.
The Ng family won the mandate from the courts to have the exclusive rights to restructure and divest assets in PAIH and its subsidiaries to repay bankers. The exclusive rights were extended by another six months and ended this week.
The banks are fighting back. They want the courts to end the exclusivity given to the Ng family to restructure and settle the debts.
The list of creditor banks are heavyweights in the world of high finance. It includes the likes of HSBC, Standard Chartered, DBS of Singapore and Malayan Banking’s Hong Kong unit.
Bankers say that most of the financial institutions have impaired the loans.
It is learnt that some of the international banks, fed up with the delays in the restructuring, have sold the debts related to PAIH and China Fishery to hedge funds.
“Some banks have resigned to the fact that recovery of the amounts owed is difficult because the value of the underlying assets, which are rights to fish in Chile and Peru, have changed,” says an executive with an international debt recovery firm.
Some bankers do not discount the possibility of the hedge funds being linked to the Ng family, as they were about the only ones who know the real value of the operations.
“Moreover, a portion of the sale of assets has to go back to the Ng family for amounts that they have advanced to the listed companies ... it is complicated,” says the executive.
The legal proceedings to find a solution to the problems of PAIH and China Fishery is likely to take precedence this year. Banks have provided for the loans but seem bent to getting to the bottom of where the money they lent to the group went to and whether there were any questionable transactions.
While the bankers are not certain of recovering anything from their US$1.7bil loans to PAIH and China Fishery, the Ng family still continues with their business of industrial fishing. But it is at a much smaller scale mostly focused in China, supplying fresh fish to customers in Hong Kong where the market is vibrant.