Vicentin
Vicentin Bankruptcy Protection Case at Risk of Being Transferred Out of Provincial Court; Steering Committee Files Memo With SDNY Seeking Discovery
Fri 02/21/2020 17:57 PM
Relevant Documents:
Feb. 14 Banco de la Nación Report
Jan. 16 Banco de la Nación Report
Vicentin Press Release
List of Vicentin Creditors
July 2019 Vicentin Financial Statement
Vicentin’s bankruptcy protection case could be transferred out of the Argentine provincial court Reconquista Santa Fe, where the soy crusher has a better chance of obtaining a larger haircut on $1.35 billion of debt, Banco de la Nación Argentina Director Claudio Lozano told Reorg. Vicentin has reportedly continued to negotiate with suppliers that it owes $350 million to outside of court in the meantime, reportedly offering a 50% haircut on that debt, according to local news sources.
The director of Vicentin’s largest creditor, who was appointed by President Alberto Fernandez’s administration, warned that Argentina’s government may intervene to prevent the soy crusher’s assets from being acquired by foreign creditors.
On Monday, the Reconquista’s Civil and Commercial Court No. 2 issued a resolution declaring its jurisdiction’s authority to review the Vicentín bankruptcy protection case “indisputable.” Judge Fabián Lorenzini will preside over the case. The resolution also prohibited “providers of public services temporarily shutting off or interrupting services provided to Vicentin … because of obligations due that are tied to the borrowing of such services.”
However, one of Vicentin’s creditors, Caja Forense, filed an injunction in Santa Fe province’s supreme court to transfer Vicentin’s bankruptcy protection case to a court in Rosario, arguing that the majority of the contracts and lawsuits against Vicentin took place in Rosario, according to Santa Fe province’s newspaper El Departamental. Lozano explained to Reorg that the case may be transferred to the city of Buenos Aires or Rosario because the courts are more “independent” there.
According to the Banco de la Nación Argentina, or Banco Nación, director, it could take one to two years to finish the case.
Separately, on Feb. 14, a steering committee of bank lenders owed about $500 million filed a memorandum with the Southern District of New York seeking discovery from financial institutions including Bank of America, Barclays, Deutsche Bank, HSBC and JPMorgan, according to SDNY documents accessed by Reorg.
Vicentin’s creditors are divided among three large groups: a group of trade creditors that is owed around $350 million; Banco Nación, which is owed $18 billion Argentine pesos ($292 million) out of the over ARS 23 billion ($372.4 million) in total the company owes banks; and a steering committee of lenders that represents large institutional holders, which is owed about $500 million.
Argentina’s publicly owned banks - Banco Nación, Banco Provincia, Banco Ciudad and BICE - are forming a common front to try to recover the debt. The steering committee has had talks with the public bank counterparties, but they are not cooperating to sue for the debt. According to Lozano, Banco Nación’s debt has a priority over debt owed to other creditors. Part of Vicentin’s debt with Banco Nación was supposed to be secured by exports , but the plan was never executed during former President Mauricio Macri’s administration. Banco Nación’s debt is also partially secured by certain energy companies, such as its debts with Glencore for its Renovar subsidiary, where it would be guaranteed a part of its oil payments, Banco Nación’s director told Reorg.
Given the risk that Vicentín’s creditors could end up in the hands of “foreign creditors,” such as European grains giant Glencore, Lozano explained to Reorg that the government could intervene to transform the private company into a mixed-capital company (public and private).
In addition, public prosecutor Gerardo Pollicita opened up a preliminary investigation on Feb. 14 alleging irregularities in the loan provided to the company. Pollicita indicted Banco Nación’s former President Javier González Fraga, Vicentin shareholder Alberto Padoan and its CEO Gustavo Nardelli, according to Argentina’s state news site Telam.
Background
A report published by Banco Nación presents information on Vicentín’s sales and its ranking in terms of invoicing among 200 Argentine companies. In each year of the Cambiemos government, Vicentín’s sales exceeded the average sales of these 200 companies.
Additionally, the company’s billing growth on an annual basis was greater than the average of the companies on the list.
The report from the bank cited multiple media reports that Vicentín through its subsidiaries was the biggest supporter of Mauricio Macri’s presidential campaign, donating a total of 13.5 million Argentine pesos (about $220,000).
The report also points out that the total indebtedness of Vicentín, about ARS 23 billion, represents about 20% of the company’s sales in 2018, while the debt of many other companies “far exceeds” the sales of those companies. Thus, the report argues it does not seem to be a case of financial stress for Vicentín. The report asserts that the debt of YPF, which it calls Argentina’s “leading company,” comprises about 60% of its total sales.
The report also highlights an article in the Argentine daily business newspaper El Cronista Comercial, which suggests that the handling of Vicentín’s international debt is a significant explanatory factor of the company’s crisis.
Specifically, El Cronista Comercial reported on Jan. 25, 2018, that Vicentín was granted a $295 million loan to finance the soy milling operating activities through its joint venture Renova, in which the firm partnered with Glencore. This financing was provided by the International Financial Corp., or IFC, Natixis and Rabobank.
On Dec. 18, 2019, according to an article from Clarín, Vicentín transferred 16.67% of its stake in Renova, and thus the portion of the debt that it is responsible for, to Glencore amid the company’s financial troubles, leading Glencore to control 66.67% of the JV. The report from the bank points out the “trade off” Vicentín makes between its international debt such as debt associated with IFC, which is a member of the World Bank, and local debt, such as that with Banco Nación.
Financial Analysis
Vicentín’s financial statements as of July 31, 2019, are presented in U.S. dollars, as the group’s sales consist mainly of exports denominated in U.S. dollars, the currency also mainly used by its competitors. The group’s funding is also mainly in U.S. dollars.
Looking at Vicentín’s balance sheet as of July 31, the company reported equity value - assets less liabilities - of $616 million. The Banco Nación report argues that this figure suggests the company is not greatly indebted, as there are many firms that have negative equity value.
The Banco Nación report also highlights an imbalance when it comes to exposure to the U.S. dollar for the company’s assets and liabilities. As of Oct. 31, 2018, only 25% of Vicentín’s assets were denominated in U.S. dollars, compared with 90% of the company’s liabilities.
Therefore, when aggregating all of the company’s assets and liabilities and using the exchange rate at the time, which was ARS 35.75 per $1, and comparing it with the assets and liabilities when using an exchange rate of ARS 60 per $10, assets increase 16.4%, while liabilities increase 61.2%.
The report underscores the fact that a line on the company’s balance sheet termed “foreign exchange goods” amounted to ARS 23.5 billion, or nearly half of the company’s assets. According to the report, foreign exchange goods are the sales the company expects to make in subsequent quarters. However, barely 5% of the assets under foreign exchange goods were denominated in U.S. dollars. This is despite the fact that the company claims 90% of its sales are made abroad.
The report then analyzes the company’s liabilities and reveals that 98.8% of Vicentín’s current liabilities as of Oct. 31, 2018, which amounted to ARS 19.528 billion, were denominated in foreign currency. Of the current U.S. dollar-denominated loans, the report highlights an export pre-financing loan for about $363 million, making up about 67% of the total amount of current loans, and a bank loan for $117 million.
The bank also points out that the company reported very little debt with suppliers of raw materials, which amounted to less than ARS 3 billion as of October 2018.
The company’s loans and borrowings are shown below:
The company’s income statement shows revenue growth of 27% to $3.57 billion for the nine months ended July 31, 2019, from $2.808 billion in the same period ended July 31, 2018. Cost of goods sold, however, increased over 30% over the same period, resulting in gross profit growth of about 14%. Operating income growth for the period was about 32.4%.
Turning to the cash flow statement, the company generated about $41 million of cash from operating activities in the nine months ended July 31, 2019. However, cash outflow related to working capital movement totaled about $57 million in the nine months ended July 31, 2019 - an increase in inventory accounted for an $85 million cash outflow, while the company spent $49 on payables. In the nine months ended July 31, 2018, working capital movement generated a $365 million cash outflow.
Corporate Structure
A report dated Feb. 14 outlines the corporate structure of Vicentín based on all of the information the bank was able to gather.
The creditor’s corporate structure of Vicentín based on all of the information it was able to gather is shown below:
A description of the operating subsidiaries is shown below:
Steering Committee Discovery
Separately, global financial institutions Rabobank, Crédit Agricole, ING Bank, IFC, Natixis and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden, or FMO - collectively known as the steering committee - submitted a memorandum of law with the U.S. District Court for the Southern District of New York seeking assistance in obtaining financial records that the steering committee says are uniquely available in the Southern District and are necessary to “get to the truth of a situation that bears all the hallmarks of major international financial impropriety” (emphasis added).
According to the filing, Vicentin owes the steering committee $500 million. The memorandum alleges that Vicentin, up until very recently, produced financial records reflecting “robust performance and financial health: ample reserves of raw materials and finished goods, positive cash flow from operating activities, minimal trade payables, and hundreds of millions of dollars of equity value.”
A breakdown of the steering committee facilities is below:
However, in December 2019, Vicentin collapsed without prior warning and shut down its operations, revealing that it did not have the reserves it previously declared and actually owed about $350 million to local farmers and grain traders. The suppliers, according to the memorandum, stopped shipping raw-material grains to the company, and that forced a halt to operations.
“It is presently unclear what caused Vicentin’s abrupt failure. Were the Company’s accounts overstated all along? Was it improperly stripped of assets? The Steering Committee does not yet know because the Company has failed to provide the required information,” the memorandum asserts.
The steering committee contends that because Vicentin’s major transactions were dollar denominated and often physically cleared through Southern District banks, the steering committee is requesting the court’s help in obtaining financial transaction records that are critical to guiding enforcement proceedings against Vicentin, which have commenced in Argentina.
According to the memorandum, in 2018, about 87.3% of Vicentin’s revenue was derived from exports. In the third quarter of 2019, about 91.8% of revenue came from exports. The transactions were mostly U.S. dollar denominated. “Vicentin was, by any measure, a major Argentine agribusiness enterprise engaged in substantial dollar-denominated sales.”
The steering committee alleges that Vicentin, between releasing its July 31, 2019, financials and December 2019, failed to advise the members of the steering committee of any change in the company’s financial position, despite being required to do so under various loan documents.
Despite various covenants in the steering committee facilities prohibiting Vicentin and its subsidiaries from selling assets other than in the ordinary course of business - subject to certain exceptions for transactions under $5 million - public information revealed that, as mentioned above, “mere days before Vicentin halted operations, the Company sold a 16.67% stake (indirectly held through Vicentin Paraguay S.A.) in Renova to Glencore in an effort to raise cash” (emphasis added).
Vicentin, the steering committee said, received over $122 million from the transaction, but it is unclear what happened to the majority of the sale proceeds.
In its argument, the steering committee states why it meets the standard for granting relief, the statutory requirements for discovery pursuant to 28 U.S.C. and the relevant discretionary factors that also weigh in favor of granting discovery.
The committee argues that it should be awarded discovery, citing the section 1728 statute: “the district court of a district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.”
According to the memorandum, the committee’s discovery targets reside, or can be found, in the district court, as the clearinghouse and all of the other discovery targets are subject to either the district court’s general or specific personal jurisdiction. “Each of the discovery targets consistently transacts business in this district acting as an intermediary or correspondent bank in connection with U.S. dollar-denominated transactions.”
The memorandum highlights that a large portion of Vicentin’s transactions are processed in this district by institutions such as the discovery targets, and that the committee has been able to confirm that Vicentin maintains accounts at certain discovery targets, such as JPMorgan Chase, and sued others, such as MUFG Bank and Itau Unibanco.
The steering committee explained it intends to take action in Argentina to hold accountable Vicentin and any other parties that were responsible for, or benefited from, the dissipation or improper overstatement of Vicentin’s assets. “It is clear that there were hundreds of millions of dollars of wrongdoing here - the request of discovery is simply needed to prove exactly where the money went,” the argument states.
According to Argentine law, the members of the steering committee have full participation rights in Vicentin’s concurso preventivo proceedings, “with standing to be heard, submit objections, vote on any proposed restructuring, and take similar actions.” The argument furthermore states that the committee has standing to seek enforcement of their rights under the steering committee’s facilities against Vicentin and other parties that may have participated in the apparent dissipation of Vicentin’s assets.
The committee’s Argentine counsel has advised that the evidence sought through the application would likely be admissible in an Argentine court overseeing Vicentin’s concurso preventivo proceeding or other litigation against Vicentin and its affiliated entities or individuals.
The SDNY accepted the steering committee's argument and granted it an order on Feb. 18. This allows the steering committee to apply for discovery from the clearinghouse payments company and other financial institutions identified on Exhibit A, and to issue subpoenas for the production of documents by the discovery targets.
Credit Facilities Agreements
Vicentin’s July 2019 financial statement states that its subsidiary Renova entered a credit facilities agreement in May 2017 with the IFC, Inter-American Investment Corp., or IIC, and the Inter-American Development Bank, or IDB, for up to $410,000. The credit facility had been allocated to the construction of a new grains port and the extension of its soy crushing capacity.
As security for all obligations assumed under the credit facility, the company pledged 100% of certain movable, registrable property currently owned or to be acquired in the future by the company as a consequence of the credit facility, as follows:
--Santiago del Carril, Kyle Owusu, Brandon Lew
Feb. 14 Banco de la Nación Report
Jan. 16 Banco de la Nación Report
Vicentin Press Release
List of Vicentin Creditors
July 2019 Vicentin Financial Statement
Vicentin’s bankruptcy protection case could be transferred out of the Argentine provincial court Reconquista Santa Fe, where the soy crusher has a better chance of obtaining a larger haircut on $1.35 billion of debt, Banco de la Nación Argentina Director Claudio Lozano told Reorg. Vicentin has reportedly continued to negotiate with suppliers that it owes $350 million to outside of court in the meantime, reportedly offering a 50% haircut on that debt, according to local news sources.
The director of Vicentin’s largest creditor, who was appointed by President Alberto Fernandez’s administration, warned that Argentina’s government may intervene to prevent the soy crusher’s assets from being acquired by foreign creditors.
On Monday, the Reconquista’s Civil and Commercial Court No. 2 issued a resolution declaring its jurisdiction’s authority to review the Vicentín bankruptcy protection case “indisputable.” Judge Fabián Lorenzini will preside over the case. The resolution also prohibited “providers of public services temporarily shutting off or interrupting services provided to Vicentin … because of obligations due that are tied to the borrowing of such services.”
However, one of Vicentin’s creditors, Caja Forense, filed an injunction in Santa Fe province’s supreme court to transfer Vicentin’s bankruptcy protection case to a court in Rosario, arguing that the majority of the contracts and lawsuits against Vicentin took place in Rosario, according to Santa Fe province’s newspaper El Departamental. Lozano explained to Reorg that the case may be transferred to the city of Buenos Aires or Rosario because the courts are more “independent” there.
According to the Banco de la Nación Argentina, or Banco Nación, director, it could take one to two years to finish the case.
Separately, on Feb. 14, a steering committee of bank lenders owed about $500 million filed a memorandum with the Southern District of New York seeking discovery from financial institutions including Bank of America, Barclays, Deutsche Bank, HSBC and JPMorgan, according to SDNY documents accessed by Reorg.
Vicentin’s creditors are divided among three large groups: a group of trade creditors that is owed around $350 million; Banco Nación, which is owed $18 billion Argentine pesos ($292 million) out of the over ARS 23 billion ($372.4 million) in total the company owes banks; and a steering committee of lenders that represents large institutional holders, which is owed about $500 million.
Argentina’s publicly owned banks - Banco Nación, Banco Provincia, Banco Ciudad and BICE - are forming a common front to try to recover the debt. The steering committee has had talks with the public bank counterparties, but they are not cooperating to sue for the debt. According to Lozano, Banco Nación’s debt has a priority over debt owed to other creditors. Part of Vicentin’s debt with Banco Nación was supposed to be secured by exports , but the plan was never executed during former President Mauricio Macri’s administration. Banco Nación’s debt is also partially secured by certain energy companies, such as its debts with Glencore for its Renovar subsidiary, where it would be guaranteed a part of its oil payments, Banco Nación’s director told Reorg.
Given the risk that Vicentín’s creditors could end up in the hands of “foreign creditors,” such as European grains giant Glencore, Lozano explained to Reorg that the government could intervene to transform the private company into a mixed-capital company (public and private).
In addition, public prosecutor Gerardo Pollicita opened up a preliminary investigation on Feb. 14 alleging irregularities in the loan provided to the company. Pollicita indicted Banco Nación’s former President Javier González Fraga, Vicentin shareholder Alberto Padoan and its CEO Gustavo Nardelli, according to Argentina’s state news site Telam.
Background
A report published by Banco Nación presents information on Vicentín’s sales and its ranking in terms of invoicing among 200 Argentine companies. In each year of the Cambiemos government, Vicentín’s sales exceeded the average sales of these 200 companies.
Additionally, the company’s billing growth on an annual basis was greater than the average of the companies on the list.
The report from the bank cited multiple media reports that Vicentín through its subsidiaries was the biggest supporter of Mauricio Macri’s presidential campaign, donating a total of 13.5 million Argentine pesos (about $220,000).
The report also points out that the total indebtedness of Vicentín, about ARS 23 billion, represents about 20% of the company’s sales in 2018, while the debt of many other companies “far exceeds” the sales of those companies. Thus, the report argues it does not seem to be a case of financial stress for Vicentín. The report asserts that the debt of YPF, which it calls Argentina’s “leading company,” comprises about 60% of its total sales.
The report also highlights an article in the Argentine daily business newspaper El Cronista Comercial, which suggests that the handling of Vicentín’s international debt is a significant explanatory factor of the company’s crisis.
Specifically, El Cronista Comercial reported on Jan. 25, 2018, that Vicentín was granted a $295 million loan to finance the soy milling operating activities through its joint venture Renova, in which the firm partnered with Glencore. This financing was provided by the International Financial Corp., or IFC, Natixis and Rabobank.
On Dec. 18, 2019, according to an article from Clarín, Vicentín transferred 16.67% of its stake in Renova, and thus the portion of the debt that it is responsible for, to Glencore amid the company’s financial troubles, leading Glencore to control 66.67% of the JV. The report from the bank points out the “trade off” Vicentín makes between its international debt such as debt associated with IFC, which is a member of the World Bank, and local debt, such as that with Banco Nación.
Financial Analysis
Vicentín’s financial statements as of July 31, 2019, are presented in U.S. dollars, as the group’s sales consist mainly of exports denominated in U.S. dollars, the currency also mainly used by its competitors. The group’s funding is also mainly in U.S. dollars.
Looking at Vicentín’s balance sheet as of July 31, the company reported equity value - assets less liabilities - of $616 million. The Banco Nación report argues that this figure suggests the company is not greatly indebted, as there are many firms that have negative equity value.
The Banco Nación report also highlights an imbalance when it comes to exposure to the U.S. dollar for the company’s assets and liabilities. As of Oct. 31, 2018, only 25% of Vicentín’s assets were denominated in U.S. dollars, compared with 90% of the company’s liabilities.
Therefore, when aggregating all of the company’s assets and liabilities and using the exchange rate at the time, which was ARS 35.75 per $1, and comparing it with the assets and liabilities when using an exchange rate of ARS 60 per $10, assets increase 16.4%, while liabilities increase 61.2%.
The report underscores the fact that a line on the company’s balance sheet termed “foreign exchange goods” amounted to ARS 23.5 billion, or nearly half of the company’s assets. According to the report, foreign exchange goods are the sales the company expects to make in subsequent quarters. However, barely 5% of the assets under foreign exchange goods were denominated in U.S. dollars. This is despite the fact that the company claims 90% of its sales are made abroad.
The report then analyzes the company’s liabilities and reveals that 98.8% of Vicentín’s current liabilities as of Oct. 31, 2018, which amounted to ARS 19.528 billion, were denominated in foreign currency. Of the current U.S. dollar-denominated loans, the report highlights an export pre-financing loan for about $363 million, making up about 67% of the total amount of current loans, and a bank loan for $117 million.
The bank also points out that the company reported very little debt with suppliers of raw materials, which amounted to less than ARS 3 billion as of October 2018.
The company’s loans and borrowings are shown below:
The company’s income statement shows revenue growth of 27% to $3.57 billion for the nine months ended July 31, 2019, from $2.808 billion in the same period ended July 31, 2018. Cost of goods sold, however, increased over 30% over the same period, resulting in gross profit growth of about 14%. Operating income growth for the period was about 32.4%.
Turning to the cash flow statement, the company generated about $41 million of cash from operating activities in the nine months ended July 31, 2019. However, cash outflow related to working capital movement totaled about $57 million in the nine months ended July 31, 2019 - an increase in inventory accounted for an $85 million cash outflow, while the company spent $49 on payables. In the nine months ended July 31, 2018, working capital movement generated a $365 million cash outflow.
Corporate Structure
A report dated Feb. 14 outlines the corporate structure of Vicentín based on all of the information the bank was able to gather.
The creditor’s corporate structure of Vicentín based on all of the information it was able to gather is shown below:
A description of the operating subsidiaries is shown below:
Steering Committee Discovery
Separately, global financial institutions Rabobank, Crédit Agricole, ING Bank, IFC, Natixis and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden, or FMO - collectively known as the steering committee - submitted a memorandum of law with the U.S. District Court for the Southern District of New York seeking assistance in obtaining financial records that the steering committee says are uniquely available in the Southern District and are necessary to “get to the truth of a situation that bears all the hallmarks of major international financial impropriety” (emphasis added).
According to the filing, Vicentin owes the steering committee $500 million. The memorandum alleges that Vicentin, up until very recently, produced financial records reflecting “robust performance and financial health: ample reserves of raw materials and finished goods, positive cash flow from operating activities, minimal trade payables, and hundreds of millions of dollars of equity value.”
A breakdown of the steering committee facilities is below:
- IFC A/B facility: $292.5 million principal amount divided into an A tranche ($35 million), B-1 tranche ($185.5 million) and B-2 tranche (approximately $72 million), all of which are secured by Vicentin’s receivables under certain “Eligible Export Contracts” relating to its crushing operations. IFC is the lender of record under the IFC A/B facility, while Natixis acts as collateral agent. About $265.5 million of principal is currently outstanding under the IFC A/B facility;
- FMO A/B facility: $150 million pre-export finance term loan, divided into an A facility ($45 million) and a B facility ($105 million). FMO acts as the agent for the FMO A/B facility, while Natixis acts as the collateral and security agent. About $150 million remains outstanding under the FMO A/B facility;
- ING facility: A pre-export finance facility, with a maximum committed availability of $115 million. ING acts as the facility agent, security agent and sole coordinator. About $71.9 million is currently outstanding under the ING facility;
- Natixis facility: An uncommitted pre-export finance facility, with a maximum facility amount of $30 million. Natixis acts as the bank under the Natixis facility. Approximately $10 million is currently outstanding under the Natixis facility; and
- Rabobank facilities: Two uncommitted pre-export finance facilities, with a combined maximum facility amount of $23 million. Rabobank acts as the lender under the Rabobank facilities. About $23 million is currently outstanding under the Rabobank facilities.
However, in December 2019, Vicentin collapsed without prior warning and shut down its operations, revealing that it did not have the reserves it previously declared and actually owed about $350 million to local farmers and grain traders. The suppliers, according to the memorandum, stopped shipping raw-material grains to the company, and that forced a halt to operations.
“It is presently unclear what caused Vicentin’s abrupt failure. Were the Company’s accounts overstated all along? Was it improperly stripped of assets? The Steering Committee does not yet know because the Company has failed to provide the required information,” the memorandum asserts.
The steering committee contends that because Vicentin’s major transactions were dollar denominated and often physically cleared through Southern District banks, the steering committee is requesting the court’s help in obtaining financial transaction records that are critical to guiding enforcement proceedings against Vicentin, which have commenced in Argentina.
According to the memorandum, in 2018, about 87.3% of Vicentin’s revenue was derived from exports. In the third quarter of 2019, about 91.8% of revenue came from exports. The transactions were mostly U.S. dollar denominated. “Vicentin was, by any measure, a major Argentine agribusiness enterprise engaged in substantial dollar-denominated sales.”
The steering committee alleges that Vicentin, between releasing its July 31, 2019, financials and December 2019, failed to advise the members of the steering committee of any change in the company’s financial position, despite being required to do so under various loan documents.
Despite various covenants in the steering committee facilities prohibiting Vicentin and its subsidiaries from selling assets other than in the ordinary course of business - subject to certain exceptions for transactions under $5 million - public information revealed that, as mentioned above, “mere days before Vicentin halted operations, the Company sold a 16.67% stake (indirectly held through Vicentin Paraguay S.A.) in Renova to Glencore in an effort to raise cash” (emphasis added).
Vicentin, the steering committee said, received over $122 million from the transaction, but it is unclear what happened to the majority of the sale proceeds.
In its argument, the steering committee states why it meets the standard for granting relief, the statutory requirements for discovery pursuant to 28 U.S.C. and the relevant discretionary factors that also weigh in favor of granting discovery.
The committee argues that it should be awarded discovery, citing the section 1728 statute: “the district court of a district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.”
According to the memorandum, the committee’s discovery targets reside, or can be found, in the district court, as the clearinghouse and all of the other discovery targets are subject to either the district court’s general or specific personal jurisdiction. “Each of the discovery targets consistently transacts business in this district acting as an intermediary or correspondent bank in connection with U.S. dollar-denominated transactions.”
The memorandum highlights that a large portion of Vicentin’s transactions are processed in this district by institutions such as the discovery targets, and that the committee has been able to confirm that Vicentin maintains accounts at certain discovery targets, such as JPMorgan Chase, and sued others, such as MUFG Bank and Itau Unibanco.
The steering committee explained it intends to take action in Argentina to hold accountable Vicentin and any other parties that were responsible for, or benefited from, the dissipation or improper overstatement of Vicentin’s assets. “It is clear that there were hundreds of millions of dollars of wrongdoing here - the request of discovery is simply needed to prove exactly where the money went,” the argument states.
According to Argentine law, the members of the steering committee have full participation rights in Vicentin’s concurso preventivo proceedings, “with standing to be heard, submit objections, vote on any proposed restructuring, and take similar actions.” The argument furthermore states that the committee has standing to seek enforcement of their rights under the steering committee’s facilities against Vicentin and other parties that may have participated in the apparent dissipation of Vicentin’s assets.
The committee’s Argentine counsel has advised that the evidence sought through the application would likely be admissible in an Argentine court overseeing Vicentin’s concurso preventivo proceeding or other litigation against Vicentin and its affiliated entities or individuals.
The SDNY accepted the steering committee's argument and granted it an order on Feb. 18. This allows the steering committee to apply for discovery from the clearinghouse payments company and other financial institutions identified on Exhibit A, and to issue subpoenas for the production of documents by the discovery targets.
Credit Facilities Agreements
Vicentin’s July 2019 financial statement states that its subsidiary Renova entered a credit facilities agreement in May 2017 with the IFC, Inter-American Investment Corp., or IIC, and the Inter-American Development Bank, or IDB, for up to $410,000. The credit facility had been allocated to the construction of a new grains port and the extension of its soy crushing capacity.
As security for all obligations assumed under the credit facility, the company pledged 100% of certain movable, registrable property currently owned or to be acquired in the future by the company as a consequence of the credit facility, as follows:
i) Levied a first mortgage on the real property in the rural zone of Timbúes, San Lorenzo, province of Santa Fe;
ii) Assigned all economic rights it may be entitled to by virtue of the milling agreements, the port services agreements and the barge terminal services agreements to be executed with Oleaginosa Moreno Hermanos SACIFI and Vicentin SAIC; and
iii) Executed an agreement called “Project Funds and Sponsor Agreement,” whereby Oleaginosa Moreno Hermanos SA and Vicentin SAIC, in their capacity as sponsors, agree to contribute to the company sufficient funds for the completion of the project or the repayment of the credit facility upon any potential noncompliance of such obligations by the company, and executed an agreement called “Share Retention Agreement,” whereby Oleaginosa Moreno Hermanos SA, Vicentin SAIC and Glencore agree to maintain their direct or indirect shareholdings, as the case may be, in the company.
ii) Assigned all economic rights it may be entitled to by virtue of the milling agreements, the port services agreements and the barge terminal services agreements to be executed with Oleaginosa Moreno Hermanos SACIFI and Vicentin SAIC; and
iii) Executed an agreement called “Project Funds and Sponsor Agreement,” whereby Oleaginosa Moreno Hermanos SA and Vicentin SAIC, in their capacity as sponsors, agree to contribute to the company sufficient funds for the completion of the project or the repayment of the credit facility upon any potential noncompliance of such obligations by the company, and executed an agreement called “Share Retention Agreement,” whereby Oleaginosa Moreno Hermanos SA, Vicentin SAIC and Glencore agree to maintain their direct or indirect shareholdings, as the case may be, in the company.
--Santiago del Carril, Kyle Owusu, Brandon Lew
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