Kauai shrimp producer Ceatech USA Inc., which let $4.8 million in loan commitments slip through its fingers, may be living on borrowed time if a couple developments fail to materialize in the next few months. Ceatech in jeopardy
without fundingThe Kauai shrimp grower
let millions in loans slip pastBy Dave Segal
dsegal@starbulletin.comThe company, already strapped for funding, suffered another setback in its fiscal second quarter when production problems in its hatchery prevented the timely restocking of its 40 ponds with adequate seed. The shortfall resulted in a $744,438 loss, nearly double the loss of a year ago.
"We have a financial crisis," Chief Financial Officer Edward Foley acknowledged yesterday. "Our prospects don't look good if we don't attract capital."
Foley, who measures the company's survivability in months without the proper cash infusion, said the 70-employee company is talking with outside investors and has been taking aggressive measures to try to increase the hatchery's survival rates.
"The good news over the past two, three weeks is that the survival rates have gone back up," Foley said. "Our scientists have instituted some aggressive programs that seem to be working, so there's a lot of encouragement."
In the most recent quarter that ended July 31, revenue from farm shrimp sales, excluding hatchery products, fell to $831,673 from $872,343 a year ago. Overall, revenues were $892,170 vs. $869,891 in the second quarter of 2001.
Eleven months ago, it looked like Ceatech would get part of the cash infusion it needed when the state Agriculture Department board, despite the objections of agriculture administrator Doreen Shishido, granted the company a $2.5 million loan under a special $5 million state aquaculture and agriculture loan program for Kauai. However, Ceatech never saw a penny of that money, or $2.3 million committed by Central Pacific Bank, because the shrimp company was unable to meet the conditions of the loans. Those loan commitments expired at the end of February.
Shishido, who said she opposed the loan from the outset because of the risk of default, sent Foley a letter on April 4 with a list of requirements needed for the agriculture department to consider reinstatement of the commitment. Among the requirements were updated financial statements, accounts receivable and payable information, updated production results, a status report on 20 additional one-acre growout ponds, updated projections, current marketing plans and final terms and conditions of the $2.3 million U.S. Department of Agriculture guaranteed loan from Central Pacific Bank.
"But they have not responded to our letter," Shishido said.
Foley, who acknowledges as much, said the hang-up is because the company hasn't heard back from the USDA office.
All the loans, Foley said, are contingent upon other parties. The state Agriculture Department loan is dependent on Ceatech getting a $2.3 million loan from Central Pacific Bank. CPB's loan is contingent upon Ceatech arranging for it to be 90 percent guaranteed by the USDA.
In addition to the federal guarantee, the loans from CPB and the state Agriculture Department depend upon consent from Bank of America, which is owed about $2.3 million by Ceatech.
Bank of America, whose loan already is 90 percent backed by the USDA, informed Ceatech in July that the company was in technical noncompliance with certain terms of the loan.
"Bank of America has not called the loan to be paid," Foley said. "These are technical defaults that we hope and expect to negotiate with not only Bank of America but with the U.]S. Department of Agriculture. We are current on all of our monthly payments to the bank."
Foley said that Ceatech, which has lost nearly $9.1 million since its inception in 1995, received a $150,000 advance from one of its shareholders to be used for working capital.
"Essentially, we have no outside source of cash right now and we have no borrowing source," Foley said. "We are dependent on recovering our receivables on a timely fashion and increasing our sales as quickly as possible. As a result of this hatchery problem, our farm's production levels have been below expectations and have put us in the financial cash crisis that we're in today."