Pescanova’s liquidity needs only covered until April 15: report

Pescanova has only enough liquidity to cover payments to suppliers and pay taxes until April 15 in what has become a “dramatic and unsustainable” situation at the Spanish food processing company, which last week said it planned to seek protection from its creditors.

Europa Press quoted sources aware of the situation within the company as saying that if Pescanova fails to complete the sale of a business it has in Chile, it will require a bridge loan of between 50 and 60 million euros after next Monday to meet working capital requirements. The company has so far managed to meet its payroll obligations.

An audit has revealed that Pescanova is carrying an additional 1.408 billion in previously undeclared debt, putting it in a situation of technical bankruptcy. Its net wealth as of the end of September of last year was only 756 million euros.

Pescanova’s creditor banks are waiting for the company to finally present its 2012 financial results to the National Securities Commission (CNMV) before opening talks on a restructuring plan for the company. Pescanova failed to meet the deadline of last Friday for presenting a complete balance sheet and profit and loss account for last year. The CNMV has requested more information.

The banks have already been obliged to provision for 25 percent of the debt conceded to Pescanova and will be required to cover for 100 percent of potential losses if Pescanova fails to emerge from receivership within a year.

Auditors are also awaiting access to further documentation and suspect that there may be more hidden debt and assets within the fish processing firm. Pescanova may have used front companies to declare only minority interests in overseas firms in order to avoid having to consolidate the debt they are carrying on the group’s balance sheets. They also suspect the company has failed to declare operations involving letters of credit. Company sources insisted Pescanova has supplied all necessary information to its auditors and that it is not trying to hide debt.

Pescanova has dismissed its current auditor BDO and is preparing to file a suit against it. PwC and Deloitte have been touted as likely candidates to carry out a forensic audit of Pescanova’s accounts in order to detect possible incidents of fraud or irregularities.