Mystic Mountain downgraded for defaulting on debt payment

Regional rating agency CariCRIS has downgraded adventure park Mystic Mountain Limited after the company failed to make an interest payment on its US$8-million debt obligation which became due in September 2020.

It comes amid some nine months of negotiations between the company and its creditors over a proposal to delay payments on its seven-year bond. Those negotiations continue even as another payment for December becomes due.

The default or ‘D’ rating is just the latest sign of mounting strains on the company, which over the past months has been trying to woo back business from locals and tourists to make up for losses sustained under the pandemic.

The default on payments also comes amid an ongoing court battle involving investors and directors, including the adventure park’s co-founder and MML Chairman and CEO Michael Drakulich.

In June, CariCRIS downgraded Mystic Mountain’s creditworthiness to weak as a result of the company being in breach of its requirement to maintain a certain balance in its debt-service reserve account equivalent to six months’ interest payments.

Before that, Drakulich had turned to bondholders looking for a six-month to one-year waiver on its debt servicing payments. He had hoped to stave off the current fallout by alerting bondholders early that the company was in a precarious position and needed a reprieve.

The primary holders of the Mystic Mountain bond are made up of pension funds, and discussions got under way from as early as March when the company realised it was having difficulty completing construction of a new area of its Ocho Rios-based park called Reggae Ridge.

The park’s circumstances were further complicated by the coronavirus, which was detected in Jamaica in early March, and led to a shutdown of the economy.

Drakulich told the Financial Gleaner that he had been awaiting a response in September, but that was delayed when he and other shareholders became engaged in a court fight to prevent majority shareholder Rainforest Adventures (Holdings) Limited, or RFA, a British Virgin Islands-registered company, from making board-level changes at MML, including adding more directors and appointing a new chairman and CEO.

Partial repayment of the principal on Mystic Mountain’s bond, for which Drakulich was also hoping to get a reprieve of two years, becomes due this month end, alongside another coupon payment.

The Mystic Mountain CEO, who said his matter with RFA is still before the courts, with another appearance set for the week of January 24, did not comment on the payments. The seven-year bond issued in 2018 pays interest at 7.25 per cent per year.

Drakulich said the discussions with the bondholders is expected to resume once the court matter has been handled.

CariCRIS too is awaiting the outcome of the negotiations to determine further rating action.

“We note Mystic Mountain Limited’s recent meetings with its bondholders, which we view as a credit positive in the circumstances and await the outcome of upcoming payments due on this debt and attendant debt restructuring arrangements,” CariCRIS said in a release on the new rating issued on December 11.

karena.bennett@gleanerjm.com