Coffee Growers ‘Left in Lurch’ Amid Collapse of Mercon Coffee Group

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By LatAm Reports Editor

Although it has been a week since CISA Exportier closed its doors, following the bankruptcy declaration of its parent company, Mercon Coffee Group, collection centers and profits remain closed while customers don’t know what to do with the crop they are cutting. Much of the coffee they are taking is owned by CISA Exportadora, because during the year it delivers inputs and technical assistance, which producers pay with the harvest, so serious companies consider it on and do not receive it. The problem is that if they don’t dry it in the right time the grain is fermented and loses quality.

THE PRENSA knew that while uncertainty reigns among producers who traditionally hand over their harvest to CISA, Mercon Coffee Group’s directors are using the sixty-day period granted to them by the New York court where they took advantage of Chapter 11 of the U.S. Bankruptcy Act, to look for investors who buy all or part of the company.

Meanwhile, in Nicaragua it is not ruled out that Exportadora Atlantic and Solcafé Nicaragua, which are after CISA the two largest exporters in the country, reassuring their spaces to process the coffee that is committed to CISA and the one that the company bought from small producers. For their part, the banks on Mercon’s list of creditors would be making moves to recover the garments granted by the company, but so far do not specify any embargo.

Collection and profit centres are closed

Sources close to CISA Exporter confirmed to LA PRENSA that the permanent employees of the collection network and the company’s dry profits remain in their posts, but are not attending to the public because so far they do not receive clear guidance on how to proceed.

In addition, there are fears that the company’s bankruptcy declaration will have damaged its reputation and that by resuming operations producers will resist selling or delivering coffee for fear of not receiving payment. This would force them to cede the company’s installed capacity to other beneficiaries and exporters so that they process and export the coffee that is committed to CISA and avoid damage to the harvest.

According to knowledgeable of the issue, it is important that if you are unable to continue your work, CISA will cede its facilities to another company, it is already possible that the rest do not have the capacity to assume the processing of all the coffee that CISA managed. Given this lack of installed capacity, it is known that other companies are expanding their shifts to extend their capacity and be able to respond to producers who urgently seek to dry their coffee. It is also not ruled out that part of this coffee ends up marketing in the domestic market and even leaving for Honduras.

CISA is a pioneer in the production of robust

According to information released by CISA Exportadora, it traditionally collected, processed and exported the production of about 4,000 coffee growers from the 444,519 recorded in the IV National Agricultural Census (Cenagro, 2011). On average, this company exports about half of the total coffee that the country sends abroad annually; that is, about 1.50 million quintals, of the 3 million quintals that the country has placed in the external market in recent years.

In addition, CISA Exportadora is the pioneer in the production of robust coffee, which is produced in the Caribbean of Nicaragua and is the only company that has the benefit to process that variety of which about 90 thousand quintals are exported that are the surplus that remains after supplying the national production of instant coffee.

Meanwhile, at the headquarters in Managua, all officials work – normally – in the midst of hermetism and lack of information on the future of the company. So far the only rapprochement they have had with the senior executives took place on Thursday, December 7, that is, a day after it was known that Mercon took advantage of chapter 11 of the Bankruptcy Act.

CISA offices work with normality.

On that day they were confirmed that managers are looking for investors who buy the global operation and, if they did not succeed, they will try to capitalize on the company in parts. It should be recalled that Mercon is headquartered in the Netherlands and operations in nine countries: Nicaragua, Guatemala, Honduras, Panama, Brazil, Vietnam, the Netherlands, the United States and Spain.

Employees also confirmed that on Tuesday, December 12, Lafise Bancentro’s legal team presented itself to the offices to conduct an inventory survey, however, so far they have not appointed an intervener. This bank is Mercon’s main creditor in Nicaragua, the outstanding debt amounts to $26 million, of a loan delivered in February 2022.

For their part, leaders of the business sector confirmed to LA PRENSA that Lafise had agreed to go to an arbitration with CISA, but subsequently decided to follow the collection through the courts and requested the seizure of accounts that CISA had in local banks, this gave advantage over three other local banks that the company also owes them.

Lafise takes judicial steps

One of these accounts was at BAC Nicaragua, to which CISA owes two million dollars. CISA also has outstanding debts to the Finance Bank (BDF) amounting to $2 million and to the Production Development Bank (Produce), to which it owes several loans amounting to about $5 million. However, it is known that so far only Lafise is making judicial arrangements, however, he has not specified the company’s intervention.

PRENSA tried to get Lafise’s version on the processes it follows to recover the outstanding balance that CISA has with them, but our queries did not respond.

According to employers, this delay could be caused by the process of hosting chapter 11 of the Bankruptcy Act that Mercon introduced last week in New York. Entrepreneurs explain that the court grants 60 days for the company to seek solutions to its problems and during those 60 days protects them from the possible actions that creditors, both local and international, can take, since the most affected is the Dutch bank Rabobank Facility, to which Mercon owes $202.55 million.

Hard to know how CISA will solve the crisis

The process they opened in a federal court in New York is supposed to allow Mercon to work normally while the process takes place. But it’s been a week since it was announced and they still don’t resume operations or announce when they will.

In the face of so much uncertainty and lack of information, employers believe that it is too early to determine how this problem will be solved, as it is even possible for the regime to promote some actions to avoid effects on the export of the harvest. So they advise to be patient and wait.

What they do admit is that small and medium-sized producers will be the most affected by the lack of payment, but also of the financing to attend to their plantations and get their harvest out. Since creditors will obtain a payment option through the bankruptcy mechanism established by chapter 11, because in due course the judge who handles the case will order the way in which those debts are paid.

In addition, this deadline will serve the company to relocate and look for options to grab air, renegotiate, buy time and return to the market. However, it is not clear how the situation will be resolved with producers, who still need resources to cut the harvest and also sell production to meet their credit obligations and even to support their families.

This article has been translated from the original which first appeared in La PrensaNI