Austral Group, Peru’s biggest fishmeal exporter, defaulted in May on a $50 million eurobond. The company has struggled ever since the El Niño weather phenomenon wiped out anchovy stocks and a weak currency raised the cost of servicing its dollar debt. To stave off bankruptcy, Austral began a government-supervised restructuring process. Austral skipped a $2.7 million payment on the bonds, triggering default on the four-year bond maturing in April 2002.

Juan Wiesner, Austral’s general manager, said eurobond holders would be given first priority for repayment after the company had completed a $250 million debt restructuring. The company plans to schedule a meeting with a committee of creditors in June when it is likely to propose a plan to convert $60 million in debt into shares. Wiesner says Peruvian law requires the company to treat all debtors equally. If creditors approve the plan, management would save their jobs, but bond-holders would hold a majority of the equity. Austral wants to pay off the remaining $190 million debt over seven years.

The payment Austral missed referred to a $50 million, four-year bond that paid 10.75%. Executives hope a recovery in anchovy stocks this year can revive the company’s health. However, leading eurobond holders have reacted angrily to the proposal saying the company has ignored them. Creditors reject a debt-for-equity swap and are considering legal action against Austral.