The Galician fishing company Pescanova is one step closer to bankruptcy after a long battle with creditors, auditors, shareholders and Spains stock market regulator, the CNMV. The firm's situation is atypical for businesses operating in Spain; it decided to ultimately to file for voluntary bankruptcy after failing to reach an agreement with its creditors.
Sources from the banks note that Pescanova's refusal to provide detailed accounting information obscures fictitious deals aimed at getting financing and diverting funds. Some of the made up deals were carried out in countries known as tax havens through a network of companies located in Namibia, Argentina and Uruguay. The twisted net of deals was so difficult to explain that Pescanova ended up esnaring itself just hours before the dealine the CNMV gave Pescanova to submit its financial figures from 2012 -- but without the signed approval of its auditor, the accounting firm BDO.
Blaming BDO and Pescanova's creditors for the illegal activity is a fruitless diversion from the strong likelihood that the case will end up in court. The Xunta, Galicia's government, knowing that Pescanova drives the region's economy, will keep trying to underwrite its debt and repeated cries for help. If it does, then Galicia could end up footing the bill for Pescanova's shady business deals similar to what happened with the region's savings bank Novagalicia.
Feijóo's government should be careful to not lose its shirt by extending loans or aid packages to Pescanova. With more than 2.7 billion euros in debt and enough cash to last 30 days, the future of the frozen food giant will depend on what auditors have to say and whether Pescanova can reach an agreement with creditors, change its management team and get more shareholders.
