The rate of the bond in dollars to 2021 that Nova Austral SA - which claims to be the only producer of antibiotic-free salmon in Chile - sold last year in the Nordic markets soared earlier this month to more than 9 per cent after the company reported disappointing results for the first quarter and a fall in earnings before interest and other items. It also reduced its projection for the rest of the year. Spreads widened to 126 basis points and reached 676 basis points over US Treasury bonds, before recovering to 593 basis points.
Controlled by private equity firms Bain Capital LP and Altor Equity Partners AB, Nova Austral warned of lower volumes due to a problem with the quality of its smolts, an early phase of salmon growth, and delays in its transfer to off-shore cages, said general manager Nicos Nicolaides by email. This caused an increase in costs since the smolts had to remain in freshwater breeding grounds for longer than planned.
The company's plans to build its own hatchery closer to its other production facilities are also increasing the needs for capital expenditures.
Among the capital expenditures, persistent weak second-quarter earnings due to low volume and a USD12.4 million bond payment that expires this month, the company's liquidity can not afford another significant withdrawal of working capital, expressed Pareto Securities in a note.
However, some investors are holding the bonds and are even evaluating buying more if the prices go down even more.
“I am confident that volumes will increase in 2019, and the bond is very safe because the controlling companies are solid,” Tobias Spies, head of fixed income at Huber Reuss & Kollegen Vermoegensve, said by telephone from Munich.
Nova Austral owns the brand of locally produced salmon products Sixty South, and its hatcheries are located within a national park in the Magallanes region, where cold waters prevent the spread of bacteria and pests that have affected salmon farmers from Chile who are located further north.
