After more than six months of deliberations and application of certain court-ordered modifications related to the liquidation of employees with inside information, Judge Michael E. Wells approved the Liquidation plan For Mercon Coffee Corporation, which is considering efforts to recover assets held by its subsidiaries Cisa Exportadora, Mercapital and Distribuidora de Granos in Nicaragua. The Ortega Murillo regime expropriated these companies after the group declared bankruptcy, and the plan does not rule out filing lawsuits to enforce the rights of creditors who have liens on the group’s assets.
The Settlement Credit Agreement contains provisions relating to the allocation of:
1. Income from any liquidation of the debtors' assets (including real estate) and inventory located in Nicaragua, including from applicable insurance policies or the proceeds thereof, and
2. “The proceeds of the causes of action arising from the debtors’ assets (including real estate) and inventory located in Nicaragua, to ensure the preservation of the rights of parties who have liens on the assets in Nicaragua,” reads part of the liquidation plan approved by Judge Wells in late July.
Read also: Mercon's lawyers explain to LA PRENSA all the details about the company's bankruptcy process and the situation in Nicaragua
Mercon plans with its assets in Nicaragua
Furthermore, in the Collateral Recovery Section of the Liquidation Fund, it details that any proceeds from the liquidation of any of the Debtors' liquidation assets and their assets that have not been sold, transferred or released, which constitute the first lien collateral, will enter this Fund including “the Debtors' coffee stock located in Nicaragua.
The document also provides that the liquidator may take necessary measures to preserve rights and make reasonable efforts to coordinate and cooperate in efforts to recover assets or pursue causes of action relating to Nicaragua.
The Plan also provides that the holders of the First Lien Security “shall have the exclusive right to receive any proceeds from the liquidation of the assets of the Liquidation Fund constituting the First Lien Security, including the Debtors' coffee inventory located in Nicaragua and any insurance policy or product thereof that may relate to or cover such coffee inventory.”
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Mercon Creditors
It should be remembered that through Cisa Exportadora this group financed the production of up to half of the annual coffee crop in Nicaragua, so a percentage of this production that the clients handed over as collateral for the financing was owned by Cisa Exportadora and it seems that it was insured, so if they could not recover it, according to the document, they could resort to collecting insurance documents.
On December 7, 2023, Mercon Group filed for Chapter 11 of the US Bankruptcy Code. The case was filed in the Bankruptcy Court for the Southern District of New York and the process allowed the company to temporarily suspend its obligations to its creditors while continuing to operate normally and at the same time being able to benefit. Or, as recently happened, obtain court approval for a plan to liquidate its assets and pay off its debts totaling about $363.3 million, distributed among more than thirty creditors from a dozen countries, led by the Dutch bank Rabobank.
Four Nicaraguan banks appear on the creditor list: private bank Lafise Bancentro, Nicaragua’s BAC and Finance Bank (BDF), and the state-owned Production Development Bank (Producemos). In total, Mercón owes the four financial entities about $30 million.
Read also: Nicaragua loses chance to revitalize Cisa Exportadora, as Mercon Coffee manages to sell its companies
Nicaragua seized Mercon's assets.
But last December, after declaring bankruptcy, the Ortega Murillo regime, which claims to have $30 million in tax debt, intervened in its Nicaraguan subsidiaries in a move the business community has called a disguised expropriation. The move keeps coffee exports in the red, as the group, through its subsidiaries, collected, processed and exported at least half of each crop.
The seizure also left the four Nicaraguan creditors in a state of uncertainty, as it prevented the subsidiaries from continuing their normal operations and the group from finding investors or buyers for them, as happened in the eight other countries where Mercon operated, through eleven companies.
During the trial in New York, Mercon confirmed the sale of its subsidiary in Vietnam for more than $10 million; he also sold his Mercon Specialty business to StoneX Group, which paid him $5.4 million for the specialty coffee business. In addition, in those months, it reduced its workforce from 597 to 204 employees.
Read also: Ortega sends Nicaragua to international lawsuit over refusal to return assets to Mercon Coffee, including Cisa Exportadora
They will assert the franchise.
Now, with the liquidation plan approved and the deadline for claims by creditors due at the end of August, Mercon Coffee will follow the approved agreement to liquidate its assets and employees, although not as intended, since Judge Wells has deprived it of some of the duties that the company had considered granting to about twenty collaborators.
“Judge Wells ruled that these assignments were improper transfers to insiders. Mercon had said the assignments were necessary to encourage the company’s leaders to stay, but Wells said they were improper under bankruptcy law,” Bloomberg reported, adding that the plan approved by Judge Wells would allow Mercon to wind down its operations.
When this process began, the lawyers who handled the case explained, in an interview with La Prensa, that the seizure of the assets of Mercón's companies in Nicaragua would expose the country to lawsuits in international courts. This is confirmed by the extensive liquidation plan approved by Judge Wiles, which refers in several sections to the movable and immovable assets and coffee stocks that the group had in the country and the efforts that will be made to guarantee the rights of the company's lien holders on those assets.
The plan also states that in order to recover part of the coffee stock they had in Nicaragua, they will be able to resort to collecting insurance policies they had contracted with insurance companies.
