In the midst of the bankruptcy process that Mercon Coffee Group took advantage of on December 7, 2023 in a federal court in New York, the assets of its subsidiary in Nicaragua, Cisa Exportadora, were seized by Daniel Ortega’s regime, which claims payment of an alleged $30 million in taxes that the company denies. In addition, the embargo hinders Mercon’s financial consolidation process and contravenes the halting of the collections guaranteed to that group to take advantage of chapter 11 of the United States Bankruptcy Act.
Since December 31, police officers have kept the profits, offices and other facilities of Cisa Exportadora taken; and on Tuesday, January 9, 2024, during a press conference in New York, a lawyer for Mercon Coffee Group confirmed the embargo and said that the company’s representatives deny that claim and have a dialogue with the tax authorities.
Economic news site Bloomberg Tax reported that after participating in a hearing in the New York bankruptcy court, Mercon Coffee Group’s lawyer, Paul Keenan, of the Baker McKenzie law firm, gave a press conference in which he confirmed that tax officials took control of Mercon’s assets in Nicaragua, as a judge appointed a tax administrator. The excuse for executing the embargo is to preserve the company’s assets to collect a $30 million tax debt from them.
They look for buyers or investors
Keenan said that the tax administrator appointed by the Nicaraguan justice system has control of almost all Mercon’s assets in Nicaragua, including the production facilities and the company’s corporate headquarters in Managua. According to the lawyer, the internal security maintained by the company was replaced by Nicaraguan police officers.
Mercon Coffee Group denies the existence of that debt and according to lawyer Keenan, its representatives have a delicate dialogue with Nicaraguan tax officials to fix the situation.
According to financial analysts, Daniel Ortega’s strategy could be to keep Cisa Exportadora’s assets to take over the coffee export business. However, they consider that control of the coffee value chain is not achieved overnight, but is a process that takes time.
In addition, they warn that by sticking with Cisa’s assets, Ortega will put Nicaragua in potential problems with the U.S. courts that are judging Mercon’s bankruptcy process, in which it is not clear whether the assets that the group has in Nicaragua are included, since there are also four local banks that the group owes money, therefore, have rights.
Debt of US$363.34 million broke
As they try to resolve the unexpected fiscal embargo in Nicaragua, they are simultaneously moving forward with the bankruptcy process they took advantage of in December, to try to clean up their finances. As part of those efforts, Mercon Coffee Group hired executives from the multinational investment bank, Rothschild & Co. who are looking for purchase offers for the group’s assets. The hope of Rothschild & Co. bankers is that the interest of an industry actor known to the Nicaraguan regime will help resolve the tax situation now facing the company.
According to lawyer Paul Keenan, at least eight companies have expressed some interest in buying Mercon’s assets and hope to make any transactions by the end of January. Meanwhile, in Nicaragua, the company’s representatives continue to pressure the tax administrator for a solution to the embargo.
The impossibility of paying a joint debt of 363.34 million dollars to Nicaraguan and foreign banks forced Mercon Coffee Group, in the middle of a coffee harvest, to benefit last December from Chapter 11 of the United States Bankruptcy Act. Such a process would give the company the possibility to continue operating normally and paralyze creditors’ collection shares, while getting investors or buyers of their assets to get the company out of the crisis it faces.
However, after the statement announcing the bankruptcy, no executive referred to the company’s situation again. The collections and benefits suspended their services and left their customers adrift, so they have had to look for where to process the coffee.
Cisa collects and exports half of the harvest
Cisa Exportadora is a pioneer in the cultivation, processing and export of Arabica coffee and more recently introduced the robust variety to the country. For more than four decades his growth allowed him to consolidate himself as Mercon Coffee Group and several years ago established its headquarters in the Netherlands from where it guarantees its presence in nine countries; Nicaragua, Guatemala, Honduras, Panama, Brazil, Vietnam, the Netherlands, the United States and Spain.
In Nicaragua they collect and process the production of between four thousand and six thousand producers, of the more than forty thousand that exist in the country and in each production cycle export about half of the harvest, that is about 1.5 million quintals, of the 3 million that Nicaragua has exported on average in the last harvests.
But the effects of climate change plantations in recent years, coupled with instability in the international price and other obstacles in the grain production and marketing chain, prevented Mercon from paying the $363.34 million debt he has to several institutions.
The group’s main creditor is the Dutch bank Rabobank Facility, to which it is owed $202.55 million. At the local level, the main creditor is Lafise Bancentro who is owed $26 million. The others affected are BAC Nicaragua, to which they owe $2 million; Banco de Finanzas (BDF), with a debt of 2 million dollars; and with the state-owned Banco de Fomento a la producción or Producemos have an outstanding debt of close to 8 million dollars.
This article has been translated from the original which first appeared in La Prensa NI