China Fishery Group Limited Has Drowned, Who Is Next?

China Fishery Group Limited (SGX: B0Z) has recently failed to repay a US$31 million principal installment on its US$650 million loan facility. Hong Kong Shanghai Banking Corporation (HSBC), one of China Fishery Group’s lenders, has filed an application to the High Court in Hong Kong to appoint provisional liquidators for both China Fishery Group and China Fisheries International Ltd.

On Monday (30th November 2015), China Fishery Group announced that it has appointed agents from KPMG Hong Kong and KPMG Cayman Islands as provisional liquidators of the company. The liquidators have also suspended two of the company’s bonds from trading.

What does it mean for shareholders?

The shares of China Fishery Group has been suspended from trading since 25 November 2015, where they closed at S$0.76. In Looking at China Fishery’s balance sheet on 28th June 2015, the company had US$1.4 billion worth of equity. Unfortunately, most of its assets are intangible assets, such as goodwill and its fishing permits, worth US$1.3 billion. Therefore, its net tangible asset is actually closer to just US$100 million.

28th June 2015 US$ ‘000 000
Intangible Assets        1,323.40
Equity        1,437.60
Net Tangible Equity            114.20

Source: S&P Capital IQ

If China Fishery Group is indeed going to be liquidated, most of its assets and receivables might be sold at fire-sale prices. And that might mean shareholders would be left with nothing at the end of the day.

China Fishery Group could have avoided all these troubles if its management had been more prudent in its risk-management and controlled its leverage. You can read more about how China Fishery Group’s heavy debt load may have troubled its survival here.

There is more

China Fishery Group is actually the listed subsidiary of Pacific Andes Resources Development Ltd (SGX: P11). In fact, close to 70% of Pacific Andes’ book value comes from China Fishery Group. Now with China Fishery Group drowning, is Pacific Andes Resources Development next?

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any company mentioned.