Ortega opened the door to an international lawsuit against Nicaragua for refusing to return its assets to Mercon Coffee.

Nearly three months after filing for Chapter 11 of the United States bankruptcy law, the lawyer representing Mercon Coffee Group in court confirmed to the judge that it is “almost impossible for the Nicaraguan government” to cooperate in the restructuring. Therefore, to pay off their debts they will focus on selling their assets and specialty coffee business in Vietnam. This means that the four Nicaraguan banks with which the group has debts will be excluded from the payment plan that the judge will endorse. Furthermore, they lost their guarantees because the state had held them when it seized the company.

This leaves the door open for Dutch bank Rabobank, Mercon’s main lender and collateral holder of the assets of the twelve companies that make up the group, to sue the Nicaraguan state in international courts in the future.

Mercon Coffee Group’s majority shareholder is Sunloved Java Holding LLC (SJH), which acquired 70 percent of the shares in June 2023. In December, after the group declared bankruptcy and filed for Chapter 11 of the United States bankruptcy law, the Directorate General of Revenue (DGI) seized all of Sisa Exportadora and Mercapital’s assets, charging an alleged debt of $30 million in taxes. And confiscated the property. Both Mercon subsidiaries in Nicaragua.

Also read: Mercon’s lawyers explained to LA PRENSA all the details about the company’s bankruptcy process and the situation in Nicaragua

DGI charged Mercon US$30 million

Furthermore, a Nicaraguan judge endorsed the intervention of the offices and all infrastructure used by SISA to collect, process, store and export approximately half of the total coffee crop produced in Nicaragua each year, and This has happened in recent years. It was approximately three million quintals per production cycle. Since then, Sisa’s offices, stores, and properties have been taken over by police agents, with the Nicaraguan state still not saying what it will do with those properties.

Mercon works with 12 companies in nine countries: Nicaragua, Guatemala, Honduras, Panama, Brazil, Vietnam, Holland, the United States and Spain; And in Nicaragua only two people are paralyzed. In the rest of the countries, creditors and authorities respected the benefit of continuing to operate normally and suspending the validity of the guarantees given for credit granted by Chapter 11, while new investors are sought with the approval of the judge. or the property is sold then establish a debt payment mechanism according to the priorities established in law.

According to Law360, a New York-based website that specializes in legal news, at a court hearing in the last week of February, attorney Paul Keenan, a partner at the firm Baker McKenzie, which is handling the filing process, said. Chapter 11, Bankruptcy Judge Michael E. Wills told, “The Nicaraguan government has indicated that it will not cooperate with Mercon’s effort to sell its subsidiary there (in Nicaragua),” and that they would run out of cash to finance the case. So he decided to focus his efforts on selling other assets, including Vietnam and the specialty coffee business.

The embargo excludes Nicaragua from the process.

The Nicaraguan government’s decision to refuse to lift sanctions, so that Mercon can restructure and comply with its commitments, has left in limbo the four banks, BAC Nicaragua, Lafiche, BDF and state-owned Proproductomos, on which the group A total of 30.43% is outstanding. Million dollars. But four thousand to six thousand producers who maintain ties with SISA have also been left unprotected. The company provided them with financing to manage their plantations, and they paid from their crops; Others contracted processing and export service only for deliveries agreed in future contracts.

Although the group initially refused the $30 million loan that DGI owed them in reference to unpaid taxes, it later made several attempts to obtain a payment arrangement that would allow it to lift the sanctions, so that Nicaragua Two of his companies, Cisa and Mercapital, will participate in the restructuring process being adopted. However, efforts with Nicaraguan authorities were unsuccessful.

As Law360 reports, attorney Keenan explained to Judge Wills that he made several attempts to “persuade the receiver” to cooperate in the Chapter 11 sale process. Initially the Nicaraguan government did not respond to the negotiators’ calls. And then there were some indications that he would not cooperate in the process.

You can also read: What is Chapter 11 that Mercon filed for and what happens after declaring bankruptcy?

Nicaragua exposed to international lawsuits

Therefore, they decided not to continue waiting for the support of the Nicaraguan tax authorities to complete the sale of the operation in Nicaragua, which has several potential buyers. Now they will focus on selling assets in other countries to complete the restructuring. However if they saw any “realistic” possibility of cooperation from the Nicaraguan authorities, they would take advantage of it.

In early January and in the face of sanctions and intervention imposed by the Nicaraguan government, the partners of the Baker McKenzie law firm explained to LA PRENSA that there was a possibility that Nicaragua would be excluded from the restructuring process, since the intervention of the companies required official cooperation. Is necessary.

He also warned that it left open the possibility for Dutch bank Rabobank to use international courts to recover the assets of Sisa Exportadora and Mercapital, which stand as collateral for loans made to the group. According to lawyers, these suits can be filed within one, ten or fifty years, because no matter how much time passes, the bank will remain the owner of the assets it received as collateral.

You can also read: How the bankruptcy of Sisa Exportadora affects the banks and the obstacles to the sale of Mercon to the government

Price volatility halted loan payments

Mercon filed for Chapter 11 of the United States bankruptcy laws due to being unable to pay accumulated debts of approximately $340 million distributed among 34 creditors in 12 countries. Most of this debt is from Dutch Rabobank, which owes more than $200 million. But this bank is also the one that owns a large portion of the $240 million that the group provided as collateral in exchange for that financing.

According to the company, various constraints prevented them from meeting their financial obligations, primarily supply problems that led to port closures and water transport being halted during the pandemic, instability in the international price of coffee in the international market and Effect of climate change in plantations.

Other related topics: Daniel Ortega seizes Ciasa Exportadora for alleged debt of US$30 million to the treasury