Peter Pan Seafood, an Alaska-based company with canneries in Dillingham, King Cove, Valdez, and Port Mollor, entered receivership, a bankruptcy-like proceeding, and its assets went up for auction earlier this month. Roger May, previous investor in the company, won the bid. However, objections were filed by various parties, challenging the outcome. A court hearing was held yesterday to decide the future of the company.
Nat Herz, author of the Northern Journal, has been following the story and joined KDLG to tell us more.
Hertz: I'm Nat Herz. I publish the northern journal, news website and newsletter,
great.
Sutherland: And could you give us a little bit of background on how Peter Pan ended up in the auction?
Hertz: Yeah, so your listeners probably are all pretty familiar with Peter Pan's seafood, longtime Alaska company. It was owned by a Japanese like multinational corporation,
and in 2020 It was bought from the Japanese multinational corporation by this group of investors, including an investment firm that actually had money from the Alaska Permanent Fund, that's McKinley capital, or McKinley Alaska. I think they've kind of gone through a number of name changes. Anyway, McKinley, a Los Angeles based investment firm called Renewable Resources Group in this Seattle area, and fish trader, entrepreneur named Roger May, who is this really colorful figure who also sells Wagyu beef and finances Hollywood movies and searches for deep sea treasure off of Juno. And so they bought the company in late 2020 with sort of this promise to, like, reinvigorate it and its four big processing plants in Valdez, in Port molar and King Cove out on the Alaska peninsula, and obviously here in Dillingham. And they were paying big money for salmon, like really, kind of making a lot of headlines. And then the whole industry kind of went into chaos because of various like global economic trends, and things did not go well, and the bank that had loaned them a lot of money, which was Wells Fargo, was like, writing's on the wall here guys, and it looks like you're about to go bankrupt, so we're gonna get a like, independent, sort of financial management firm in here and straighten things out and sell off the company assets to pay the debts that you owe us. And that process, it's not actually, from a technical standpoint, a bankruptcy. It's this weird legal process called receivership, and I think you need a degree in accounting, finance or law to understand that. So that's where it is now.
Sutherland: Okay, so Peter Pan Seafoods goes to auction. What happens at this auction?
Hertz: Yeah, so basically, what the context is, Peter Pan, they borrowed a lot of money from a lot of people to, like, run the business, and they've got to pay the money back. And so now they're at a point where, you know, they're not a profitable business venture, and so they have to sell off the company's remaining assets. They sold one of the plants already. They sold their Valdez plant to Silver Bay Seafoods, which is this kind of growing player, a big player in the Alaska seafood processing industry. Now they have these three other plants left. They have some assets in the Seattle area. And so basically this, there's the financial firm that's kind of running the company, and they, I think, are also working with sort of more of like an investment bank, to basically figure out, how do we sell off all these different pieces of the company to raise the most possible money to pay back the debts that are owed. And so they actually, it's like one of these weird corners of, like corporate law, like they had an auction, I think it was last week or the week before, and all these like businessy people and bankruptcy lawyers and people with, like, representatives of the investors, like, they all, I don't think they were in a real room. I think it was more like a phone room and a zoom type hearing. But they all got together and they were literally calling in bids. Like, ‘who's gonna bid a million dollars for the Dillingham plant?’ ‘Who's gonna bid a million dollars for the port molar plant?’ Not a public process, the public only kind of learns about it afterward by documents filed in the receivership case, where they had a transcript of the proceedings, and it's pretty eye opening stuff, where it's just like, you know, this kind of real fabled, storied Alaska business, they're just sort of selling it off for parts. I think initially, they sort of went through and tried to sell the assets one at a time, but then in the end, they were accepting bids for all of the assets at once. And that process concluded last week.
Sutherland: And what was the conclusion? How did it come to a close?
Hertz: Well, so in their report we have like two leading bids, a winning bid from Roger May, and a backup bid from Silver Bay Seafoods, Roger May's bid, Roger May being the one of the original partners in the group that bought Peter Pan. May attracted a lot of attention and a lot of anger from the fishing fleet because he's sort of the face of this company that's failed and in some cases. Fishermen say he has failed to pay them for the fish they've delivered.
He beat out silver based seafoods by, like, an incredibly tiny margin. Like, effectively a dead heat. But the firm running the auction was like, Roger May is the winner. We're going to award these assets to Roger May with Silver Bay and another kind of business partner as a backup. But this process is not over yet.
Sutherland: So where do we go from here? What will happen next?
Hertz: So they announced the results of the auction in the last few days, and then in the middle of last week, there was a deadline in the receivership in court for people who didn't like the results of the auction to file formal legal objections. And they were all due on September 25 and I get these automatic alerts and updates when there are filings in the case. And on the 25th it was like, ping, ping, ping, ping, all these objections coming in to my inbox of all these different sorts of angry people and businesses and groups that you know were really mad at the way Peter Pan has been run, and were objecting to Roger may being the winner of the auction and taking over the business. And those objecting parties included fishing businesses that hadn't been paid. They included business partners in a seafood storage warehouse. Really interestingly, the objections also included Roger Mays, like co-investors in the original purchase of Peter Pan. They put in this filing that was 20 pages, and it was pretty shocking to read, where they were basically like, Roger May is an insider. He has access to sort of special information, and his conduct over the course of the sale has depressed the value of the company, and the fishermen really are not interested in working for or with him anymore and he should not be the winner. The company basically should be given to Silver Bay Seafoods. This was a pretty shocking thing to read from a couple of investment firms that, up until a few months ago, had been working on running and saving the company with Roger May. They also put in some filings saying that Roger May had potentially misrepresented some kind of financial information around when all three of them were loaning Peter Pan some money to keep it afloat. And so now all those objections are with the court and there is going to be a hearing on the third that's in two days. I think they're going to have opportunities for everyone to kind of plead their case and then they're gonna have to decide, do we give this company to Roger May, who has the highest bidder, or do we give it to a seafood company that seems like they might be able to function a little more easily given sort of that they don't necessarily have the same kind of anger and animosity toward them.
The other thing that's interesting is there, there is a sort of third player here. There's this Los Angeles based businessman that apparently lent Peter Pan ten million dollars last year when they were in kind of a cash crunch and as lateral Peter Pan put up one of its processing plants, the Port Molar processing plant. It's a really remote site that was rebuilt after a fire, and is one of the more modern and attractive plants that they have. And as part of that transaction where this guy, his name's John Ketchum, lended Peter Pan money, they say in their filings that Roger May had to basically say, ‘I will not get paid back for my lending of money to Peter Pan before this guy, John Ketchum, gets paid back.’ And both Roger May and John Ketchum are trying to acquire parts of Peter Pan using, sort of the money that Peter Pan already owes them, so essentially, sort of on credit. And John Ketchum is saying, ‘I should be able to buy this Port Molar plant because it's the collateral and my debt is further toward the front of the line than Roger Mays, because he explicitly gave up that privilege when I loaned the company money.’
So, as you can hear, I mean, if you're kind of lost in this, I mean, I'm a reporter who's been trying to track this over the past few months, it's definitely really technical, it's confusing, it's not all public. We kind of see these pieces of the iceberg pop up here and there, and you're kind of trying to figure out, like, what's going on behind the scenes. And I think this is a process that will, you know, continue to play out over the rest of the week. And I'm guessing we'll probably, there's a good likelihood that it kind of escalates into sort of more serious, like court battles going ahead.
Sutherland: So we have this hearing on the third with these two possible outcomes. It sounds like either the judge will rule to uphold the auction results and give the plants to Roger may or overturn and give them to Silver Bay. What factors can we anticipate the judge taking into consideration when making this decision?
Hertz: I think it is very possible that, like some of the assets end up with Roger May and some of them end up with Silver Bay Seafoods and or this guy, John Ketchum. I don't think it's like a black or white situation. I think the judge is going to have a lot of power and flexibility and sort of how they make their decision. I think you would need a sort of bankruptcy or receivership attorney here to really be able to say exactly what the explicit legal criteria that they're going to have to make their decision on.
There are a lot of things to balance here, right? Like, they're the lenders that lent Peter Pan money. There are the fishermen that are owed money by Peter Pan for salmon that they delivered and never got paid for. There are the communities that really depend on tax revenue and jobs where these processing plants are, and you know, they're the investors that have a lot of money at stake and could be losing 10s of millions of dollars here. And so if the judge really is only thinking about Wells Fargo the bank, and how you raise the most money they might just stick with the Roger May bid. But if they're thinking about broader interests of these Alaska communities and the fishermen and these other considerations, then I think you know you would see a different set of decisions. But I don't think we're really going to know that until Thursday at 12:30 Alaska time.
Sutherland: Great. Thank you so much, Nat.
Hertz: Yeah, happy to be here.
That was Nat Herz, Journalist and author of the Northern Journal. Peter Pan Seafoods hearing took place yesterday at 12:30 Alaska time.
