Cablegate: Where's the Tuna? Lehman Brothers' Bankruptcy and Pirates

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DE RUEHPL #0316 2611012
ZNR UUUUU ZZH
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FM AMEMBASSY PORT LOUIS
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RUEHNR/AMEMBASSY NAIROBI 2998

UNCLAS PORT LOUIS 000316

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AF/E FOR MARIA BEYZEROV

E.O. 12958: NA
TAGS: ECON ETRD EFIS ELAB PGOV SE
SUBJECT: WHERE'S THE TUNA? LEHMAN BROTHERS' BANKRUPTCY AND PIRATES
AFFECTS SEYCHELLES

1. SUMMARY: Concerns over the state of the Seychelles tuna industry
rose in the wake of news of more piracy in the Indian Ocean and the
bankruptcy announcement of Lehman Brothers, a shareholder in one of
Seychelles' largest seafood operations. While recent pirate attacks
have everyone's attention, not all parties are worried that the
Lehman Brothers news will have a significant impact. END SUMMARY.

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LEHMAN BROTHERS BANKRUPTCY
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2. In early 2006, Lehman Brothers created and led an investment
consortium called Marine World Brands (MWBrands) in the purchase of
Heinz's seafood business, which included commanding shares in four
leading European seafood brands, and related canning and processing
factories in Ghana, Portugal, France, and Seychelles. The
Seychelles facility, Indian Ocean Tuna Company (IOT), is currently
60 percent owned by MWBrands and 40 percent government owned. As
the head of the MWBrands investment consortium with a controlling
share of 18 percent (the remaining 82 percent is said to be held by
undisclosed institutions located mainly in the U.S.), Lehman
Brothers has a large stake in the largest nongovernment employer in
the Seychelles.

3. According to contacts within IOT, the September 15 announcement
of Lehman Brothers' bankruptcy caused widespread concern among lower
level and middle management employees. A subsequent conversation
with Joe Madnach, Chief Financial Officer of IOT, confirmed this,
but Madnach reassured ECONOFF that upper-level IOT management is not
particularly concerned about Lehman Brothers events affecting
operations. In addition to IOT's current profitability and
performance, Madnach said the structure of ownership, which limits
Lehman Brothers' financial impact on the company, assuages any
concern IOT has about Lehman's bankruptcy.

4. Madnach further noted that MWBrands' overall performance is too
good for it to be dissolved and offered that, although no official
communiqu has been released, the most likely option he envisions is
a reallocation of Lehman's 18 percent share (in MWBrands) and
appointment of a new firm to head the consortium. Madnach thinks
this will have minimal effect on operations.

5. Opposition leader Wavel Ramkalawan and his Seychelles' National
Party, however, are concerned over the fall of Lehman Brothers.
Lehman Brothers is not only tied to the Seychelles economy through
IOT, but also issued and backed 200 million USG worth of bonds in
2006 to service Seychelles' external debt and another 30 million USG
to fund interest on that initial loan. Seychelles' recent credit
downgrade by two of the three leading credit agencies (Standard &
Poors and Moodys) also contributed to opposition concern. In a
September 15 meeting with the DCM, Ramkalawan said the issue would
be raised in Parliament because the public needs to know. On
September 16, Finance Minister Danny Faure answered the opposition's
parliamentary question by downplaying the effects of Lehman
Brothers' bankruptcy on the Seychelles economy.

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PIRATES!
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6. While both IOT and the Government of Seychelles are downplaying
the effect of Lehman Brothers' bankruptcy, both parties, as well as
the Seychelles public-at-large, seem to be worried about the
problems of recent piracy. Many ships registered in Seychelles
returned to Port Victoria this week after attempted attacks on the
Drennec, a French tuna vessel, and other ships by Somali pirates.
These ships are refusing to leave port until their safety concerns
can be met.

7. In a September 15 conversation with Ambassador Cabrera, Indian
Ocean Tuna Commission (IOTC) Executive Director Antonio Anganuzzi
confirmed that many boats have halted operations temporarily due to
attacks. Post contacts estimate that there are thirty private boats
docked in Port Victoria. IOT Finance Director Madnach told ECONOFF
that while these private boats are not linked to IOT, their refusal
to leave Port can affect operations since the ships want to offload
and IOT has a limited 7000 tons storage capacity for offloading.

8. On September 16, Minister of Environment Joel Morgan presided
over a meeting of stakeholders affected by pirate attacks to discuss
next steps. At that meeting, Port Victoria was offered as a "safe
haven" to ships and port facilities were offered to regional armed
forces to assist in concerted efforts to fight the pirates. In a
meeting with the DCM earlier that day, Foreign Minister Patrick
Pillay said he felt the U.S. military would be a major stakeholder
in the effort to ensure ship safety in their waters.

CABRERA

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