The story of cod farmer No Catch’s demise is, by now, widely known.
As the mainstream press has told it, the once-soaring cod-farming company over-promised, overspent, overlooked operational issues, and ended £40 million (€51 million/$80 million) in debt.
Karol Rzepkowski, founder of No Catch, and former sales director Mike Lloyd, say what you've heard so far isn’t true.
The real story, as they tell it, is equally as dramatic, but instead of being about the failure of one of the world’s most high-profile aquaculture firms, it’s about a foreign financier’s decision to pull the plug with scant warning on a business that was showing nothing but promise.
In an exclusive interview with IntraFish, Rzepkowski and Lloyd recount their version of the financial saga leading up to the administration.
What was lost
At the time No Catch’s financing fell through, the company was without question one of the most exciting companies operating in the aquaculture sector, at least from the outside.
Its No Catch organic cod was being sold in 10 European countries. It had listings with retailers in Canada and the United States, and big deals were in the works with Marks & Spencer, Sainsbury’s and Dutch retailer Sligro, among others.
The company, it could be argued, introduced the idea of farmed cod to the masses, and in a uniquely positive way.
“In the space of 18 months, we established a consumer brand. If that was Coca-Cola, they’d have spent a fortune,” Lloyd said.
So how did they do it? Long-standing aquaculture players who have spent years and millions of dollars trying not only to perfect production techniques but also build up brands, niches and premiums for their fish assumed No Catch was burning through a lot of cash.
Rzepkowski and Lloyd say not as much as might be believed, at least not on the marketing side.
All that TV and newspaper coverage? Free. The killer Brussels show booth? Thrown together last minute on a shoe-string budget. The only advertising the company did was paid for by U.K. retailer Tesco. That amazing Web site? £20,000 (€25,000/$40,000).
“We didn’t have to spend any money. We didn’t have any money to spend,” Rzepkowski said.
Yes, money was spent on marketing -- around £250,000 (€320,000/$500,000) in total -- but over nearly three years, Rzepkowski said. And yes, No Catch spent more on its 2005 processing plant acquisition than it thought. The company faced the same operational problems as other cod farmers, which also cost money.
Overall, costs were in line with expectations and the company was on track to deliver the results it projected, the executives said.
In 2005, the latest year for which figures are available, the company reported an operating loss of £3.2 million (€4.1 million/$6.4 million), on revenue of £2.7 million (€3.5 million/$5.4 million). Rzepkowski told IntraFish early last year the company’s 2006 revenue was £4 million (€5.1 million/$8 million).
He insists No Catch “didn’t run out of money. We didn’t do everything right, but part of pioneering is making mistakes.”
What really happened had nothing to do with poor management, the two executives said, and everything to do with poor financing.
Bank comes calling
The next chapter of the story actually requires two tellings, one by Rzepkowski and Lloyd, another by their main creditor.
What the two parties agree on is, by 2007, private equity firm Milestone, which owned 75 percent of the company, and Kaupthing, Singer and Friedlander, a subsidiary of Iceland-based bank Kaupthing, invested £20 million (€25 million/$40 million) and £15 million (€19 million/$30 million), respectively, into No Catch.
Milestone and the No Catch management team always knew the company would need more financing by the end of 2007, Rzepkowski and Lloyd said, in the form of a new private equity owner or additional loans.
Rzepkowski and Lloyd say midway through the year, Milestone put an extra £5 million (€6.4 million/$10 million) into the company, expecting Kaupthing would match it, as part of a verbal deal the executives claim the two parties struck when Kaupthing first bought in, a claim Kaupthing strongly denies as “100 percent not true.”
Executives with Milestone did not return calls for comment.
“We were given all these warm assurances,” Rzepkowski said of the Kaupthing funding.
By November, No Catch managers were getting concerned about the Kaupthing funding, Rzepkowski and Lloyd said.
As they tell it, later that month, Kaupthing called Milestone execs to give them the news that would eventually sink the firm. Not only would Kaupthing not be putting in the £5 million matching funds, it wanted back the £15 million it loaned the business.
“The reason? They said, ‘We’ve actually decided we don’t want to be in aquaculture,’” Rzepkowski said.
Kaupthing gave Milestone and No Catch management two months to raise the £15 million, the executives claim.
“What can we do in December and January? Especially in this financial climate?” Rzepkowski said.
Remarkably enough, Rzepkowski and Lloyd said the company received a takeover offer in mid-February from a major aquaculture firm. The two declined to name the prospective buyer, but said the potential new owner would have made a great fit.
“This would have kept the company going and paid off all the creditors,” Lloyd said. “It would have saved all those jobs.”
When No Catch presented Kaupthing with the offer, Rzepkowski and Lloyd claim, the bank asked for more up front cash. No Catch managers went back to the buyer, renegotiated, and presented the bank with the deal in line with the terms they sought.
That was on Friday, Feb. 15. By the following Tuesday, No Catch executives were told the company was being put into administration.
“It’s unheard of that a bank would not consider an option of cash on the table,” Rzepkowski said.
Bank’s take
Kaupthing and Grant Thornton, the company handling No Catch’s administration, paint a different picture of the events leading up to No Catch’s collapse.
For one, the company was not in solid financial shape; No Catch was bleeding money, Kaupthing said.
A spokesman with Grant Thornton said a large part of No Catch’s fish wasn't ready for sale and the company was looking at mounting losses.
Paul Cunningham, head of business support and recovery at Kaupthing, Singer and Friedlander, told IntraFish the alleged verbal agreement for Kaupthing to match Milestone’s funding is not accurate, and in fact would go against Kaupthing’s business model as an asset-based lender.
“We lent against the identifiable biomass,” Cunningham said.
No Catch did receive several acquisition approaches, Cunningham said, but all fell through. The takeover offer Rzepkowski and Lloyd claim Kaupthing rejected? Not really a takeover offer.
“No due diligence had been done. It was never a deal. That party looked and decided against buying,” Cunningham said. “It was clearly management acting in their own interest and not in the interest of its senior creditor.”
The administration, for which Kaupthing was indeed responsible, came not at the last minute but as a last resort, Cunningham said. Kaupthing worked for months to find a suitable buyer or a financing option for the company to move forward.
In addition, there's been no institutional decision to stop lending to the aquaculture sector.
The decision to put No Catch into administration “was purely for lack of having any viable model to operate the business,” Cunningham said.
Unreached potential? Ill-fated venture?
The lessons to take away from No Catch depend on whom you ask.
Rzepkowski and Lloyd read the entire incident not as a referendum on No Catch or their management but on Kaupthing and the tightening of credit markets worldwide.
“We were the first high-profile victim of the credit crunch in the seafood industry,” Rzepkowski said.
Company projections were for £15 million in sales by the end of 2008, and to break even on profit. By 2009, the company estimated, it hoped to be the world’s first profitable cod farming firm.
“We were looking at real expansion. The product was performing exceptionally well. The concept was absolutely resonating with consumers,” Lloyd said. “This was going to be our takeoff year.”
Most exciting for managers was that the company would be moving from a contract-growing business model to a vertically integrated one: The first No Catch-grown fish were not sold until November. The company had for the first two years been selling fish grown under an investment deal former owners Johnson Seafarms struck nearly three years ago.
All No Catch management, including Rzepskowski and Lloyd, believed 2008 would be a big year and increased their personal stakes in the company in the fall of 2007.
“Why would the board purchase shares in our own company if we thought it was going under?” Rzepkowski said.
Kaupthing’s Cunningham said the management’s behavior in the runup to administration was motivated purely by self-interest and not out of consideration for its primary creditor – Kaupthing.
Simply put, Kaupthing and Grant Thornton argue, No Catch was put into administration because it no longer was a viable company.
End of No Catch
What does the future hold for No Catch? To hear it told by Rzepkowski and Lloyd, nothing. Grant Thornton is liquidating the assets, including the aquaculture equipment and 1.2 million market-sized fish.
“No Catch is finished. It’s dead,” Rzepkowski said. “The day the administrators took it over it was doomed to fail.”
The two executives take particular umbrage with how Grant Thornton is dismantling the business. Almost immediately, all portion deals with multiple retailers were discontinued. Retail buyers often heard word from others in the seafood industry, or from Rzepkowski or Lloyd.
“In the case of Morrisons, [the administrators] left a message with reception [to tell them they would no longer be supplying them],” Lloyd said.
“You don’t treat the biggest retailers in the world like this,” Rzepkowski said. “The way it’s being dismantled is really sad.”
A spokesman with Grant Thornton wouldn't comment on how the company is selling No Catch’s assets, but told IntraFish it expects a buyer or buyers to be named in the coming weeks. The sale could be an outright purchase of what remains of the company or assets could be sold off piecemeal, the spokesman said.
The fate of the No Catch brand – the hot pink symbol of the company’s lost promise – remains unclear. Without the raw material behind it, its survival is questionable as well.
“I don’t think we failed,” Rzepkowski said of No Catch. “I think what we accomplished with No Catch in a short space of time nobody else has ever done before. Who knows where we wouldn’t gone? The sky was the limit.
“No Catch -- multi-award winning No Catch -- here’s the only cod farmer in the whole of the European Union, possibly one of the most exciting and sexy new brands in Scotland. All of this is closed down overnight by an Icelandic bank,” Rzepkowski said.
From that Icelandic bank’s perspective, not without reason.
