Troubled salmon farmer owes almost $560m, court is told

Chile salmon farmer Nova Austral owes nearly US$560 million, a document it has submitted to a Chilean court shows, with by far the largest debt - $415.5 million – owed to northern European bond trustee and loan agency Nordic Trustee, which has offices in Scandinavia and Germany.

Norway’s largest financial services group, DNB Bank, is owed more than $69m and feed supplier Comercializadora Nutreco Chile (Skretting) is owed almost $24m.

The document also details 471 Chilean suppliers with whom Nova Austral maintains some level of debt; nine foreign suppliers; 16 creditors for fees; and a customs agency. Assets that are mortgaged and pledged in favour of the main creditors are also mentioned.

Nearly 3,000 jobs at stake

Nova Austral is seeking to reach an agreement with its creditors to restructure its liabilities and assets through Chile’s judicial reorganisation procedure and has submitted its case for doing so in the document which has been presented to the Court of First Instances and Guarantee of Porvenir.

The document indicates that close to 3,000 direct and indirect jobs depend on the company and that it is a key economic actor for the Magallanes region and, especially, for the municipality of Porvenir where it is the main employer, but that a series of exceptional factors have prevented it from the normal development of productive activities and the fulfilment of its projections and commitments with creditors.

Nova Austral’s troubles stem partly from 2019 when a months-long investigation by an online newspaper revealed that the company – then owned by private equity companies Altor, of Norway, and US-based Bain Capital – had massaged its figures to conceal mortalities. This led to senior managers being sacked.

Unprecedented sanctions

Lawyer Ricardo Reveco Urzúa, representing Nova Austral, said the company had been faced with unprecedented sanctions by the Superintendence of the Environment, which revoked environmental permits for some salmon farms, and by state aquaculture agency Sernapesca, which applied sanctions that limited harvests in other farms.

Authorities had also frozen payments of more than 7 billion Chilean pesos that Nova Austral had been due to receive under the Navarino Law that incentivises the establishment of businesses in the Magallanes and Chilean Antarctic through tax and customs benefits.

“All of the above has meant a decrease in the company’s production to a third compared to what it was a few years ago, which has obviously affected the company’s cash flow and damaged its ability to meet its commitments with its creditors,” said the lawyer in his presentation.

Changes not recognised

The difficult economic situation of the producer is also explained by a lack of recognition of the operational improvements that new managers have applied for four years; the invalidation in court of the permits to relocate farms; and the Covid-19 pandemic, in addition to internal and external economic factors that caused a general increase in costs and market closures.

After explaining that it was not possible to reach a global agreement to restructure the purely financial debts and ensure the operational continuity of the company, Noval Austral requests the Court of Porvenir to initiate bankruptcy proceedings for judicial reorganisation “so that Nova Austral together with its creditors achieve an agreement, allowing it to continue developing its business, fulfilling its commitments with its creditors, its community and its workers”.