Debt-laden Spanish food processor Pescanova has decided to seek protection from its creditors and is preparing a suit against BDO, the company that has audited its books for the past 10 years.
In a statement posted on the National Securities Commission's (CNMV) website just after midnight on Thursday, the Galicia-based fishing company said it intends to dispense with the services of BDO, but did not cite a reason. Company sources on Friday confirmed that Pescanova plans to file a suit against the consulting firm, alleging that it had failed to carry out an adequate analysis of its accounts.
The firm, which catches, processes and packages fish, also said it plans to hire a forensic auditor to go over its balance sheet and profit and loss account for 2012. Such analysis would look for any indications of possible fraud.
The company has acknowledged that it has been running a double accounting system, and according to sources in the know, has prepared documentation for the CNMV that estimates its debts as 1.2 billion euros higher than previously declared. The documentation has not been audited nor given the official seal of approval by the company's management, which held a marathon session on Thursday that lasted more than 12 hours.
The documentation estimates its debt at 2.7 billion euros, when as of the end of September of last year, it stated in its accounts that it stood at 1.522 billion.
Sources said that BDO has accused Pescanova of hiding documents from it, and of hindering the work of going over its books. For its part, Pescanova's management has accused the auditor of needlessly generating distrust in the company. BDO declined to comment on these latest developments.
Pescanova had until Friday to present its financial results for last year to the CNMV. At press time, there was no indication that it had done so.
Pescanova's creditor banks are also at odds with the company on the real level of its debts and have hired KPMG to examine its books.
Pescanova has been in pre-receivership for over a month. Under Spanish bankruptcy legislation, this is a period of up to three months afforded to a company to renegotiate its debt. However, Pescanova has yet to sit down with its creditors.
The CNMV has imposed a trading ban on Pescanova's shares since March 13. The CNMV has also opened a probe into possible "abuses" in the trading of Pescanova's shares, indicating that people with insider information had been trying to manipulate its share price.
The Pescanova group is made up of an intricate network of companies in different countries and a workforce of 10,000. Members of Pescanova's management were due on Friday to meet with labor representatives to explain the situation in the company. "Receivership is something very serious as it not only affects the banks and the company's board, it affects everyone," one union source said.