Mystic Mountain bankrupt

Indebted and insolvent Mystic Mountain Limited, MML, was this week certified bankrupt by the government’s Office of the Supervisor of Insolvency, OSI, after the majority of its creditors voted down a proposal on Tuesday denying the company time to make good on its $1.3 billion debt to bondholder Sky-High Holdings Limited.

As certification of the assignment of assets was being issued on Wednesday by the OSI, Sky-High Holdings moved to appoint Wilfred Baghaloo, the managing director of PricewaterhouseCoopers Tax and Advisory Services Limited in Jamaica, as receiver to take control of the Mystic Mountain attraction in Ocho Rios, St Ann, which is MML’s main asset.

Sky-High’s directors are hotel mogul Adam Steward and businessman Ian Haynes.

Baghaloo said Wednesday he would take control of the assets, per the debenture agreement, review the company’s current financial affairs, convene discussions with MML trustee Caydion Campbell and the company’s officers regarding matters of importance, including the attraction’s operational status, and submit the required reports to Sky-High and the regulatory agencies.

He stressed that Mystic Mountain remains open to the public for business.

“Once the bondholder’s debt is settled, the company can exit receivership or the receiver may have to seek many other possible solutions to settle the bondholder’s debt. There are many options available to us, and it is too early to comment on which of the options are most feasible for the bondholder and for the company,” Baghaloo told the Financial Gleaner.

“Anything that we do has to take a public approach, so if we are seeking to sell the company’s assets and operations we would do so through a public tender,” he said.

The MML request for another two months’ reprieve to April 13 this year came after the Supreme Court last month handed it a lifeline to avoid being declared bankrupt and the bondholder moving to take over its assets.

The court had ordered the rerun of a creditors meeting that was held in August last year, at which a previous proposal to pay off the amount at the time of $1.2 billion in interest and principal due on the bonds, between December 2021 and June 2022, was rejected by the secured creditor.

The on-the-spot verbal payment offer made at the August 9 meeting followed an earlier written proposal filed with the OSI on July 19 last year, and also lodged at the Companies Office of Jamaica, in which MML had promised to make good on the debt by August 27, 2021 from a purported line of credit that should have come from a financial institution, which was not named. MML announced at the August meeting that the financing deal had fallen through.

The voiding of the first creditors meeting also kept in place the stay of execution which had been triggered by MML’s OSI filing in February last year that it intended to make a payment proposal to the bondholders, who had called their investment in January 2021 after missed interest and principal payments by MML in 2020.

At the done-over meeting held online on Tuesday – in which all known MML creditors participated, and not just the representatives of the bondholder, who were the sole creditors invited to the voided August 2021 meeting – Sky-High again rejected the offer made only to the holders of the senior secured notes. Its ‘no’ vote and that of the majority of the unsecured creditors prompted the bankruptcy declaration and the simultaneous move by Sky-High to recover its investment.

Reports out of the meeting, during which unsecured creditors – to whom the proposal was not addressed but whose right to vote on it any way was affirmed by the court – are that 87 per cent of the unsecured creditors present voted to reject the proposal, with 13 per cent voting to accept it.

MML trustee Caydion Campbell filed a report with the OSI shortly after the end of the three-hour meeting on Tuesday, clearing the way for the OSI’s certification of the bankruptcy and asset assignment on Wednesday.

“I can confirm that Sky-High voted against the proposal, which effected the stay of action against the bondholder to be lifted and for the bondholder to now be able to move forward and appoint a receiver under its collateral. Eighty-seven per cent of unsecured creditors voted against the proposal made by MML,” said Sky-High’s Haynes on Tuesday in response to the Financial Gleaner’s request for comment.

“This vote of the unsecured creditors triggers a deemed application of assignment of assets, subject to the rights of the secured creditor. It therefore does not preclude the secured creditor to enforce its collateral by appointing a receiver,” he said.

In its latest proposal, which was filed with the OSI on January 28, and also required to have been filed with the Companies Office, MML said it would be receiving funding through $1.3 billion in private equity financing raised by its beneficial majority shareholder, to cover the full amount of the indebtedness on or before April 13 this year. MML is directly owned 100 per cent by Karibukai Limited, but its ultimate parent is Rainforest Adventure Holdings Limited, which holds a majority stake in Karibukai.

According to the proposal, a copy of which was obtained by the Financial Gleaner, MML and its trustee said that at December 31, 2021, the company had US$17.62 million in total assets, with the plant and equipment of its attractions business in Ocho Rios accounting for US$12.25 million of that amount.

The company is reporting US$11.38 million in liabilities, of which US$7.87 million, or J$1.26 billion, was said to be owed to the bondholders and J$42 million to the bondholders’ representatives, JCSD Trustee Services Limited. Unsecured debts included a near US$1-million, short-term loan from Sygnus Capital Limited; trade payables and other liabilities of US$1.5 million, including deferred taxes of about US$81,000; and a long-term loan of approximately US$804,000 from Josef Wiegand.

The MML accounting noted that although the company appeared to be balance sheet-solvent, with reported shareholder equity of US$6.2 million, most of the liabilities are now due with the bondholders having demanded full repayment of their investment.

huntley.medley@gleanerjm.com