Iceland crisis hits seafood industry
Published Wednesday October 8th, 2008
Finance Near collapse of Iceland's major banks make an impact on the seafood industry throughout Atlantic Canada
For Glen Cooke, the near-collapse and then nationalization of Iceland's second-largest bank wasn't just an interesting tidbit on the evening news.
The stunning turn of events Monday as Iceland came close to national bankruptcy was a much bigger and more personal concern.
"The big impact that people probably are not aware of is that these Icelandic banks, Glitiner and Landsbanki, both those banks (finance) a lot of Atlantic Canadian seafood companies," said the chief executive officer of Black's Harbour-based Cooke Aquaculture Inc. on Tuesday.
"Glitiner has a very small piece of Cooke," he said. "These Icelandic banks they're banking a lot of firms - Clearwater Fine Foods, they're part of the syndication in Connors Brothers, they back the Barrett Group out of Newfoundland."
Cooke said the Iceland banks had worked hard to establish themselves as the financiers for the world's seafood industry.
"They basically got involved in the seafood industry in the United States, the U.K., Norway, throughout the region and obviously it's not good to lose one of our banking partners."
Iceland's second-largest bank, Landsanki was nationalized Monday as the tiny country of 300,000 struggled to prevent the complete failure of its banking system. Iceland nationalized Glitnir late last month amidst homegrown economic problems and the turmoil in the global financial system as a result of a freeze in the world's credit markets.
Cooke said he felt bad for his Icelandic friends as he watched the news unfold.
"We've got a lot of good Icelandic friends. I've been to Iceland many times recently this summer and their economy has been growing incredibly over the last few years."
Cooke Aquaculture is a private, family-owned company with a vertically-integrated salmon farming operation. It employs 1,400 people in Atlantic Canada and Maine.
It generates about $270 million in revenue each year.
The firm has been pursuing an aggressive growth strategy. On Sept. 18, just before the credit crisis began to wreak havoc and gain widespread attention, Cooke closed a deal to buy Salmones Cupquelan S.A., a Chilean company with 30,000 metric tonnes of salmon production and annual sales of approximately $100 million.
The deal brought Cooke's total production to over 80,000 metric tonnes.
As bad as the financial situation is for Iceland and for the Atlantic seafood industry as a whole, the demise of that country's dream of building an international banking sector isn't among Cooke's top two concerns.
"The number one concern is: will consumption drop off in the U.S. markets and Canada if we slide into a recession?" he said. "Number two is our customers in the marketplace. Are they going to be stable enough to distribute us?"
Cooke said he heard of some of his distributors having difficult accessing credit in order to lease new delivery trucks in the wake of the global financial turmoil that has battered the world's economy.
So far his company hasn't had any difficulties accessing financing, he added, noting most of is company's financing is long-term and has been put in place for some time. Additionally, Cooke uses a syndicate for its financing that includes several different banks.
"But we haven't done any major acquisitions of late," he said. "But what I'm also hearing is that for new loans, new acquisitions - that type of thing - interest rates are going to be much higher."
Higher interest rates are a concern, he said. As a privately-owned company with a healthy balance sheet, Cooke Aquaculture is well-positioned to weather the current financial storm, Cooke added.
There may even be opportunities for Cooke to continue to grow despite the turmoil, he said.
"But it is a concerning and very challenging time, obviously, in the banking world."
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