Insight: Failure of Spain's Pescanova lifts lid on culture of secrecy

Fri Apr 26, 2013 2:24am EDT
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By Tracy Rucinski and Carlos Ruano

VIGO, Spain (Reuters) - Even in a record year for Spanish bankruptcies, the filing by Pescanova (PVA.MC: Quote), a household local name that farms, catches and processes fish, stands out not just for scale, but for the opaque culture and boardroom dysfunction it has revealed.

The April 15 insolvency filing mentions debts of 1.5 billion euros ($2 billion), but financial sources who have had dealings with the company say total debt is probably more than double that amount, potentially making it the country's third-largest bankruptcy.

The court accepted the filing on Thursday and said it would name independent administrators to replace the board.

Regulators and auditors are in particular scrutinizing the actions of its chairman, Manuel Fernandez de Sousa, the son of company founder Jose Fernandez, who built Pescanova from a small business in the Galician port city of Vigo to one of the world's largest fishing firms, with interests from Argentina to Namibia and 10,000 employees worldwide.

Pescanova revealed only on the day of the insolvency filing that Sousa had sold half his 14.4 percent stake in the company in the months leading up to the filing without telling regulators, as required by law.

The stake sale will have raised at least 27 million euros, according to Reuters calculations, a third of which the company said he lent back to Pescanova.

In a regulatory statement announcing the stake sale on April 15, Pescanova said: "Concerned about the group's liquidity and Pescanova's difficulties in financing itself, the chairman decided to offer his own patrimony to the company to resolve urgent liquidity problems."

Pescanova is now being investigated by the stock market regulator for possible market abuse. The company also failed to file accounts on time after falling out with its auditors BDO, who refused to sign off the accounts and were fired this month.   Continued...

A truck drives out from a factory of Pescanova, a household local name that farms, catches and processes fish, in Chapela, near Vigo, northern Spain April 19, 2013. Picture taken April 19. To match Insight SPAIN-PESCANOVA/ REUTERS/Miguel Vidal