Mystic Mountain bankruptcy heads to court

Two meetings of groups of creditors of indebted Ocho Rios attraction Mystic Mountain Limited, MML, held during the past week, have failed to resolve issues related to whether the beleaguered company will be declared bankrupt and its assets sold off to repay bondholders and other persons and institutions it owes money.

Unresolved, too, is whether MML's changing payment proposal to settle its debt will be accepted by the creditors. Likewise, the status of the trustee the company chose to oversee that process is still not settled.

Now, the parties are once again headed to court to seek to have the matters determined even as a new meeting of creditors is to the convened at a date yet to be made known, to attempt once more to bring closure to the knotty issues.

Andrea Kelly, manager of JCSD Trustee Services Limited, which represents a group of bondholders, told the Financial Gleaner that at a virtual meeting on Monday, MML made a new proposal asking bondholders to agree to keep the instrument current and receive payments outstanding in December year and again in June 2022.

The new proposal changed promises made in a document they filed with the Office of the Supervisor of Insolvency and Government Trustee on July 19. The July proposal, which followed what was said to have been a preliminary proposal circulated to the bondholders earlier, had offered payout by August this year from funds to be secured from an unnamed financial institution as well as from an escrow account funded by MML's main shareholder. MML's parent company is St Lucia-registered Karibukai Limited, while Karibukai is majority held by Rainforest Adventure Holdings, RFA, which is registered in British Virgin Islands.

Financial Gleaner sources say that at the August 9 meeting the MML directors announced that talks for the possible bank loan had fallen through but that payments would be made from renewed cash flow from operations as well as the escrow account.

At the August 9 meeting, the new payment proposal, as well as a move by the bondholders to replace MML-appointed Caydion Campbell of Kingston-based Phoenix Restructuring, Advisory & Insolvency Services Enterprise as the trustee, were stalled after the supervisor of insolvency, retired Court of Appeal judge Ferdinand Smith, noted that while only secured bondholders had been invited to the meeting, the Insolvency Act required a vote on the issue by creditors without specifying any particular class of creditors. It was decided that the matter would be taken to the Supreme Court for clarification before a new meeting is convened.

Kelly said she would be guided by JCSD Trustee's lawyers before commenting on which entity would be applying to the court for the clarification. Questions to the office of the supervisor of insolvency on whether it would be bringing the matter in court were referred to Campbell, the company-appointed trustee.

“The meeting of creditors scheduled for August 9 commenced and discussions were had but a procedural point arose which necessitated an adjournment to allow for the directions of the court to be sought,” Campbell told the Financial Gleaner via email.

“The application to the court will be made as soon as possible and will seek, among other things, clarification on how certain sections of the Insolvency Act are to be interpreted and applied,” he added without specifying who would be filing the application to the court.

Campbell's role in convening and his participation in the August 9 meeting is also the subject of debate among bondholders, as creditors who met days before on August 4 had voted to replace Campbell with Wilfred Baghaloo of accounting firm PwC. Campbell offered no comment on the move to replace him, except to point out that he had no role in convening the August 4 meeting.

Creditors led by major bondholder Sky-High Holdings Limited, SHL, are said to be in the process of determining how to address that matter of the trustee, with a possible recourse to the court not being ruled out.

Directors of SHL Adam Stewart and Ian Haynes did not immediately respond to a Financial Gleaner request for comment about the status of the trustee and the next steps after the expiration next week of an injunction said to have been secured against SHL by MML in July preventing SHL from exercising its power over a debenture it holds to acquire MML assets in lieu of the debt.

The July proposal was made by MML after bondholders, said to comprise mainly pension funds, called their $1.1 billion bond due in 2025 following MML's failure to meet interest payments.

MML disclosed in its proposal to the bondholders, the majority of whom are unsecured creditors, that its secured creditors included SHL, which it described as class one creditors who would receive priority for the settlement of their US$1.7 million in the event of liquidation.

Sygnus Capital and Josef Wiegand, who it is understood is the Germany-based creator of the attraction's popular bobsled ride, are listed by MML as being among a group of creditors who are owed a total of US$3 million. The indebted company would also face some US$872,000 in redundancy and severance pay as well as taxes and statutory contributions to the Jamaican government in the event of a winding up or asset sale.

huntley.medley@gleanerjm.com

Correction: Adjustments have been made throughout to correct the date of the secured creditors meeting from August 7 to August 9.