Mystic Mountain looks headed for auction

Mystic Mountain, the popular attraction in Ocho Rios, St Ann, known for its tropical rainforest canopy and wild rides, appears headed for the auction block as receiver Wilfred Baghaloo maps out the shortest route to enabling bondholder Sky-High Holdings Limited to recoup its investment of close to $1.3 billion.

Baghaloo raised the likelihood of a sale in a response to Financial Gleaner queries this week, while appearing to close the door on the prospects for a payout of the bonds from operations.

“The sale of the ‘assets and operations’ is a practical routine solution in these situations. Any sale will be done through our usual, established public transparent process,” the receiver, who took control of the attraction following his appointment on February 9, said via email.

Asked about the possibility of a payout to the bondholder using revenues from the business, he said: “Given the obvious historical financial challenges of the company, I doubt this is a practical option.”

Mystic Mountain Limited, MML, the owner and operator of the attraction, which is run from leased premises on the hillside overlooking the picturesque Ocho Rios waterfront, a stone’s throw from the world-famous Dunn’s River Falls and close to the Ocho Rios pier, was last week certified bankrupt by the government’s Office of the Supervisor of Insolvency, OSI. This followed a vote by the majority of the company’s creditors to reject a proposal from MML for more time to settle the $1.3-billion debt to Sky-High and its agent JCSD Trustee Services Limited by April 13 this year.

The directors of Sky-High are businessman Adam Stewart and company executive Ian Haynes. Stewart is executive chairman of Sandals Resort International, ATL Group and Island Routes Caribbean Adventures – a company that manages tours and attractions bookings in some 11 English-, Dutch- and Spanish-speaking Caribbean tourist destinations. Haynes is Island Routes’ chief financial officer.

The secured senior bonds, which pay 7.125 per cent interest and which were scheduled to mature in 2025, were called as being due and payable in full in January last year, after MML missed scheduled interest payments in 2020. Other payments of interest and principal which became due in 2021 were also not paid. The January 2021 demand notice for payment in full from the bondholder sparked a year-long insolvency process that saw the Supreme Court being asked to weigh in on various aspects of the matter.

“My job is to find solutions to settle the bondholders’ (secured creditors) debt in a timely manner, while ensuring that the other creditors’/stakeholders’ interests are not negatively affected. Since my appoint last week Wednesday evening, we have started looking at various possible solutions. It is too early to say what will be the best solution,” said Baghaloo, managing director at PricewaterhouseCoopers Tax Consulting Jamaica.

In his report on MML’s initial payment proposal to the bondholders in July 2021 and its revised proposal filed with the OSI on January 28 this year, the company-appointed trustee, Caydion Campbell, emphasised that the Ocho Rios attraction made up the bulk of MML’s assets and underscored the importance of it being treated as a turnkey operation to realise maximum gain. The plant and equipment of the attraction were said to be valued at US$12.25 million in June 2020.

Campbell noted in his January 29, 2022 report that: “A potential challenge with the sale of these assets is that the company operates from leased property to which it has made substantial improvements. The fact of the significant investments on leasehold property poses a risk to the debtor, in that most of the infrastructure would have been designed with the peculiar topography of the property in mind and would not readily lend themselves to dismantling and relocation to facilitate a realisation independent of the leased property. Therefore, the leased property, along with rides, attractions and the supporting machinery and equipment would have to be offered as a turnkey business operation. The debtor would, however, be faced with an obsolescence bargaining position and offering assets for sale under financial distress.”

He surmised then that the preliminary estimated realisation of the assets in a situation of bankruptcy or receivership, would be in the region of 50 per cent of their value.

“Any efforts to maximise the realisation of these assets would likely involve them being advertised internationally to facilitate a competitive bidding process, and could take 12 to 24 months to be completed. This timeline would be inclusive of a transparent process for the bidding on the assets, negotiation with preferred bidder(s), and achieving financial close to facilitate distribution to creditors,” Campbell said.

The MML trustee pitched for the creditors not to “mothball the company’s operations” and expressed doubt that a bankruptcy trustee and/or receiver would be able to profitably operate the facility, even though he concluded that the business could have been rehabilitated.

“Based on my evaluation, MML is experiencing a temporary cash flow insolvency, with an asset-liability mismatch, but remains balance sheet-solvent, and can generate a positive cash flow from operating activities,” Campbell said.

huntley.medley@gleanerjm.com