Monday, May 27, 2024

Mercon Coffee Group files for bankruptcy protection in the U.S.

MILAN – Mercon Coffee Group, one of the world’s largest coffee traders, has filed for bankruptcy protection in the United States. A combination of factors, including climatic and market-related challenges, led to unsustainable problems, said the company in a statement. This compelled them to seek protection under Chapter 11 of the bankruptcy law, filed in New York, the city where the company was founded in 1982.

This will enable the group to continue operating and fulfil their commitments to clients and employees.

In the letter, signed by Mercon’s Chief Executive Oscar Sevilla, the company said that lenders have elected “not to extend credit agreements, resulting in extremely tight working capital conditions”.

“In the past three years, logistical disruptions stemming from the pandemic, coupled with the effects of frosts and droughts in Brazil, the prolonged market downturn, sustained price volatility, and the rapid rise in interest rates have collectively formed an exceptionally challenging operating environment for Mercon,” Sevilla says in the letter.

“As a result, the company no longer has the necessary financing to continue its operations. After evaluating all options, the board of directors has decided to seek protection under Chapter 11 of the United States Bankruptcy Code as the best alternative to safeguard the company’s assets.”

Rumours of financial problems at the coffee trader began circulating in the recent days, after the closure of Cisa Exportadora, a Mercon subsidiary based in Nicaragua.

According to court documents accessed by Bloomberg News, Mercon has debts exceeding $360 million. Among its creditors are financial institutions and investors.

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The majority of the debt, $202.5 million, is part of a secured credit line granted by the Dutch entity Rabobank. Among its major unsecured creditors are Nicaraguan Banco Lafise S.A., Out Capital LLC, London Forfaiting Co., and the sustainability-focused investment fund & Green.

Rabobank confirmed Mercon was a client, but declined to comment further on the situation, reports Reuters.

Mercon said in the letter that it would work with clients to “ensure a seamless process concerning open contracts”.

A Mercon source said the company had stocks and would continue to operate under bankruptcy protection, moving coffee from its warehouses and shipping it to buyers.

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