Austral takeover ends peacefully after 12 months

from Latin Lawyer - January, 2005

In what was reportedly the first successful takeover of a company undergoing insolvency proceedings in Peru, Tri Marine International, Mogster Gruppen and Octagon Financial Services International LLC have acquired control of Peruvian fishmeal producer Austral Group SAA, through a capital contribution made by their special purpose holding company Dordogne Holdings Inc. The capital increase was approved on October 27 by the majority of the target company’s shareholders. The purchase price was not disclosed.

Juan José Cauvi, of Payet, Rey, Cauvi Abogados, asserted: “This is the conclusion of one of the most important takeovers in Peru. A new door has been opened for the Austral Group, allowing it to recover its place among the most significant fishmeal manufacturers of the world.”

Austral is one of the leading fishmeal and fish oil manufacturers and exporters in Peru, and has current revenues of around US$80 million. However, due to excessive levels of indebtedness and, reportedly, climatic variations related to El Niño, the company had been subject to an administrative pre-insolvency proceeding since March 2000.

In 2000, Austral and its creditors executed an Acuerdo Global de Refinanciación (AGR) to reschedule the company’s debt and set rules for the surveillance of the operations of the company. Under the agreement, the creditors’ assembly was entitled to amend the terms of the AGR and the surveillance committee of creditors oversaw the correct performance of the agreement. The debt subject to the AGR is estimated at around US$104 million.

The buyers had begun a hostile takeover of Austral in 2003, approaching the company’s shareholders and creditors. However, the company’s former controlling shareholders had entered into an exclusivity agreement for the transfer of their shares with US fishmeal producer Daybrook Fisheries, which was also interested in acquiring Austral.

To resolve the situation, the creditors’ committee and the shareholders agreed to set up a private auction in order to sell the company. Banco de Crédito del Peru arranged the bid, which required that bidders should offer each shareholder the same amount per share and each class of creditor the same percentage per credit. In the end, only Dordogne made a firm offer, on March 31 of last year.

César Arbe, of Muñiz Forsyth Ramírez Pérez-Taiman & Luna-Victoria, noted: “This was the first successful takeover of a company involved in an insolvency procedure. What is interesting is that it was done through a private bid rather than through insolvency proceedings, which has been the common path used in previous acquisitions of insolvent companies in Peru.”

In June, Austral’s creditor’s assembly waived all events of default under the AGR and agreed to further reschedule the debt. The creditors agreed to grant the company a three-year grace period before restarting payments, and the repayment of the debt was rescheduled over an 18-year period, depending on the type of debt.

The final acquisition required a majority of the company’s shareholders to agree to waive pre-emptive subscription rights under the Peruvian Corporation Act. This allowed Dordogne to subscribe fully to the capital increase, giving it control of over 60 per cent of the resultant equity. The company acquired outstanding shares in a subsequent public offer, and now holds 85 per cent of Austral’s equity.

“During the last thirteen months, it was an exercise in permanently deactivating time bombs, which never seemed to stop ticking in our heads. If any of those bombs exploded, Austral would inevitably have gone bankrupt. The successful result was the sum of determination, tenacity, courage and vision of a few individuals who were able to see that the transaction was still possible despite all the problems,” concluded Ismael Noya de la Piedra, of Estudio Echecopar.

Octagon Financial Services International LLC is a New York based investment adviser and arranger, with experience in commodities and trading. This is its first operation in South America. Tri Marine International is a US-based private company involved in the tuna industry; it runs tuna businesses in Colombia and Ecuador. Norwegian company Mogster Gruppen also has a prior presence in region, including fishmeal operations in Chile. Its core businesses include the manufacturing of fishmeal, fish farming and ship building.

Juan Jose Cauvi, of Payet Rey Cauvi Abogados, added: “The new ownership represents the ideal combination of expertise needed to create synergies in Austral”.  The buyers were advised by Payet Rey Cauvi Abogados, through a team led by partner Juan Jose Cauvi, which included partner Alonso Rey, and associates José Cúneo, Daniel Abramovich and Jorge Lazarte.  Muñiz Forsyth Ramírez Pérez-Taiman & Luna-Victoria advised Austral’s former controlling shareholders, through partners Albert A Forsyth Solari and César Arbe.

Banco de Crédito del Peru and Austral’s financial creditors were advised by Estudio Echecopar, through partners Ismael Noya de la Piedra and Rafael Picasso, and associates Mónica Llosa, Pablo Berckholtz, Yasmin Farah and Alonso Miranda.

Austral was advised by its in-house counsel Adriana Giudice.

Hector Calero, Corporación Andina de Fomento’s in-house counsel in Peru, chaired the creditors' steering committee through most of the process.