Multinational green coffee trading company Mercon Coffee Group filed for Chapter 11 bankruptcy in the United States on Wednesday.
The move was precipitated days earlier by the unexpected suspension of operations at longtime Mercon sibling company CISA Exportada, a key Nicaraguan green coffee buyer, exporter and farmer financier.
Restructuring under Chapter 11 bankruptcy would allow The Netherlands-based coffee conglomerate to remain in business in order to pay off its debts.
A report from Reuters, which broke the news of Mercon’s Chapter 11 filing yesterday, said the company and its affiliates have a total debt of $363 million. Bloomberg’s review of court documents estimated Mercon’s liabilities to be $357 million. Mercon’s listing of its 30 largest existing unsecured claims in the Chapter 11 filing amounts to approximately $110 million, according to DCN’s review.
In a letter sent to clients that was obtained by Reuters and Bloomberg, Mercon Chief Executive Oscar Sevilla said “the macroeconomic factors working against Mercon have persisted for longer than expected, and lenders have elected not to extend credit agreements, resulting in extremely tight working capital conditions.”
The letter further stated that Mercon plans to work with clients to “ensure a seamless process concerning open contracts,” according to the Reuters report.
As of this writing, Mercon Coffee Group had not replied to DCN’s request for comment. Neither the group nor its subsidiaries have publicly addressed the bankruptcy filing.
In Sevilla’s letter, as reported by Nicaragua’s La Prensa, Mercon said ongoing market disruptions from the COVID-19 pandemic, coupled with ongoing market volatility and rising interest rates, have created “an exceptionally challenging working environment for Mercon.”
The vertically oriented Mercon Group is represented in more than 60 countries globally while maintaining offices in Brazil, Guatemala, Honduras, Nicaragua, Panama, the United States, Spain and Vietnam.
[Disclosure note: Mercon Specialty, a subsidiary of Mercon Group, maintains an advertising relationship with Daily Coffee News.]