American Seafoods may default on massive debt; Goldman Sachs is a business people love to hate; Starbucks’ Schultz says he’s not running for office.
American Seafoods Group, whose fleet of big, blue-and-white catcher-processor ships harvests more fish than any other U.S. company, may soon default on some of its massive debt as it struggles with low prices and inadequate cash flow.
The Standard & Poor’s credit agency last month lowered its rating of the Seattle company, writing that unless market conditions change, “a default or financial restructuring appears inevitable within six months.”
American Seafoods employs about 1,000, according to its website, and is based on First Avenue near Pike Place Market. Its six factory trawlers often fish in the Bering Sea, where American Seafoods has about 45 percent of the quota for at-sea harvesting of pollock; in Seattle they dock at Terminal 91 near Magnolia.
The most- and least-loved companies
5) Johnson & Johnson
6) Kraft Foods
7) L.L. Bean
8) Publix Supermarkets
11) Berkshire Hathaway
12) Walt Disney
1) Goldman Sachs
3) Dish Network
6) Sears Holding
7) Koch Industries
9) Charter Communications
10) Bank of America
13) General Motors
14) JPMorgan Chase
15) United Airlines
16) Time Warner
Source: Harris Poll
The company is laboring under more than $900 million in estimated debt, and has been highly leveraged for at least a decade. The debts were piled up when prices were strong for the pollock and Pacific hake it catches.
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But in recent years tilapia and catfish have challenged pollock’s role as the dominant raw material for fish sticks, surimi and other products. Meanwhile, demand from the important Japanese market has weakened and the yen has plunged in value.
That’s left American Seafoods with shrinking revenue from which to service its multitiered debt, some of which comes due next year.
“It’s the worldwide pricing of fish, and it’s not in their hands,” says S&P credit analyst Chris Johnson. “That’s just making it very difficult for them to meet their financial covenants, and sustain their current capital structure.”
The S&P credit rating for ASG Consolidated, the parent company, has dropped to CCC-, below the 9th rung on its 12-step ratings ladder. S&P says the company’s debt is more than 8 times its operating earnings before depreciation expenses.
Moody’s, another bond-rating service, estimates American Seafoods had just $370 million in revenue for the 12 months ended in September.
That’s down from $514 million in 2005, when American Seafoods still reported its financial results publicly.
Moody’s downgraded the company in November. Both agencies’ outlook on the parent company is negative, meaning further rating cuts could follow.
American Seafoods spokesman Ron Rogness did not return calls seeking comment on its financial situation. In October, the financial-news service Debtwire reported American Seafoods had hired advisory firm Blackstone to explore refinancing options.
Handicapping how the situation might be resolved is difficult from the outside, says Johnson: “All kinds of offers could be on the table.”
It’s not likely the financial undertow will pull the company into Chapter 11 bankruptcy reorganization. More probable is a “distressed exchange” in which some lenders are pushed to accept concessions such as lower interest or longer repayment terms.
If there were a full-fledged liquidation, however, S&P figures the gross value of American Seafoods’ assets is about $685 million — not enough to pay all the lenders.
John Sackton, publisher of industry website SeafoodNews.com, says there’s been a lot of merger-and-acquisition activity in the seafood business recently.
But unlike the major U.S. pork and beef producers that were sold to foreign giants in recent years, American fishing fleets must be 75 percent U.S.-owned, according to federal law. That limits the potential pool of buyers, if American Seafoods were put up for sale.
Regardless of the outcome, says Sackton, “Those vessels are going to keep operating and harvesting pollock and operating out of Seattle. Because they are just too efficient, too good at what they do.”
— Rami Grunbaum: email@example.com
Goldman is a loathed business
Goldman Sachs may need to work on its image.
This year, the firm beat recall-riddled General Motors along with Koch Industries and BP for the dubious distinction of worst corporate reputation, according to a new poll.
Market-research firm Harris Poll on Wednesday published its 16th annual ranking of the 100 most visible companies in the U.S., sorted by how positively the general public viewed them, and Goldman landed at the bottom.
Harris Poll surveyed 27,278 people to generate its list of America’s most- and least-loved corporations. Wegmans, a Rochester, N.Y., grocer whose fans write love letters to its stores, claimed first place, followed by Amazon, Samsung, Costco and Johnson & Johnson. Halliburton, Monsanto, Dish Network and AIG were near the bottom of the list.
The report didn’t speculate on how Goldman earned its helping of hate, but the investment bank has been the subject of derision for its role in the financial crisis, and in 2011 was found by a U.S. Senate panel to have misled clients about its dealings with shaky mortgage-backed securities. Goldman’s public image has also been battered by insiders, like the executive director who resigned in 2012 by way of a scathing op-ed in The New York Times.
More recently, Carmen Segarra, a former bank examiner for the Federal Reserve, released secret recordings to the public-radio program “This American Life,” suggesting the central bank had gone easy on Goldman for a suspicious transaction with a Spanish Bank.
Notably, although few have warmed to AIG and Goldman, overall distaste for the financial industry has eased: The share of Americans looking positively on the industry has increased to 35 percent from around 25 percent in 2013.
A bad reputation can affect a company’s bottom line. Harris Poll says 36 percent of adults have decided not to support a business because of something questionable they learned about its conduct. And more than half of consumers now do some research on the businesses they’ve either heard about or are about to spend money on.
The findings suggest that companies aren’t as immune from moral blunders — be it expired meat or toxic mortgages — as they once might have been. “The American public strongly believes reputation matters and acts on that belief,” said Carol Gstalder, of Harris Poll.
Consumer ill will may not have the effect on Goldman that a few brutal reviews on Yelp has on a mom-and-pop shop, but there’s another unfortunate side effect of being a loathed business behemoth: Research into top business schools shows graduates increasingly passing over Wall Street for careers elsewhere, meaning Goldman, and firms like it, may be missing the talents of some of the brightest would-be financiers.
— Bloomberg News
Schultz says politics isn’t in his future
Starbucks CEO Howard Schultz says he does not have designs on the White House, according to a Time cover story published Thursday.
For his part, Schultz insists he’s not interested in running for office at the moment and has neither the temperament to make the compromises necessary to embark on a Democratic political career nor the desire to be a third-party candidate.
“I don’t think that is a solution. I don’t think it ends well.”
For now, Schultz says, he’s content to “see what Hillary [Clinton] does.”
Entertainment magnate David Geffen told the magazine that he thinks Schultz has what it takes.
“I first told Howard he should run back in 2008,” Geffen said. “We were having a very intense conversation about things that were happening in the country, and Howard had a strong point of view about various things … We both felt there was a lot of corruption in government and a lack of conviction to put things right.”
Anti-tax activist Grover Norquist also weighed in on the possibility of Schultz running. “ ‘You should run for office’ is what people in this country say to you when they mean ‘I like your ideas. I wish people in Washington thought like you did,’ ” he said, according to the magazine. “That’s what Ralph Nader’s friends said to him, and when he ran, they screamed at it and said, ‘Hey, you are funneling money away from the mainstream of the party!’ ”
— Bloomberg News
|The most-loved companies|
|5.||Johnson & Johnson|
|Source: Harris Poll|
|The least-loved companies|
|10.||Bank of America|
|Source: Harris Poll|