Mystic Mountain offers August $1.2b bond payment from bank loan
Names hotel chain affiliate as potential buyer
Indebted tourism attraction Mystic Mountain Limited, MML, has proposed to settle its $1.2 billion debt to bondholders on or before August 27 with what it says is a loan now being negotiated with an unnamed financial institution even as official...
Indebted tourism attraction Mystic Mountain Limited, MML, has proposed to settle its $1.2 billion debt to bondholders on or before August 27 with what it says is a loan now being negotiated with an unnamed financial institution even as official documents indicate that the loss-making adventure park, which has been embroiled in legal battles involving some current and former directors and shareholders, now has an interested outside buyer, to which the chairman of Sandals is connected.
The settlement offer to stave off bankruptcy and sale of its assets to repay debtors is contained in a payment proposal that MML filed with the Office of the Supervisor of Insolvency, OSI. The company has been in talks with the OSI since January of this year when holders of a secured $1.1 billion bond due in 2025 called in the investment following the company's failure to meet interest payments.
In the proposal, which was submitted on July 19, the final date by which MML was required to submit a proposal to the bondholders through the OSI, the company also requested a waiver from the bondholders to be allowed to bring its interest payments up to date.
MML got two extensions to the filing deadline. In its May 25 request to the OSI for an extension to June 4, a copy of which was obtained by the Financial Gleaner, the company said the extension was required as its consultations found that a preliminary proposal it circulated was not acceptable to some bondholders.
“By letter dated March 5, 2021 from Sky-High Holding Limited, whom we have been advised are the “duly authorised representative of the secured bondholders, the trustee received a response on the preliminary proposal. SHL is affiliated with the Sandals Group of Companies, who are a leading group of hotel companies who are interested in acquiring the assets and operations of MML,” MML directors Josef Preschel and Omar Lagraba said in their application to the OSI.
MML told the OSI that SHL has filed a suit in court against the attraction.
Sky-Holdings is a Jamaican registered company that is listed as jointly held by a St Lucian registered entity called SLASCA. Sky-Holdings directors were named as Adam Stewart, Ian Haynes, Ryan Terrier, and Dmitri Singh. Stewart is Chairman and CEO of Sandals Group.
In the final proposal document, a copy of which has also been obtained by the Financial Gleaner, MML said it has “received approval from a reputable financial institution to provide financing facilities that would address the current deficiency”.
The financial institution was not named, neither was the precise amount of the bank loan being sought, but MML said additional funding was being arranged by the majority shareholder of its parent company. The MML parent company is St Lucia-registered Karibukai Limited, in which British Virgin Island-registered firm Rainforest Adventure Holdings, RFA, is the majority shareholder.
The statement of accounts that accompanied the proposal document, also signed by RFA directors Preschel and Lagraba, as well as company appointed trustee Caydion E. O'Neil of Kingston-based Phoenix Restructuring Advisory & Insolvency Services, noted that MML was carrying a debt to bondholders totalling US$7.45 million, a short-term loan to Sygnus Capital Limited of US$1 million, long-term loan to a Josef Wiegand of approximately US$874,000, trade payables of US$880,000, and deferred tax liabilities of just under US$81,000.
The company noted that while it had made a net loss of just over US$1 million for the 10 months to May 31, 2021, it had total assets of US$17.85 million and total liabilities of approximately US$11.35 million to create a book value of shareholders equity of US$6.5 million.
Showing that it has been making efforts to become current in servicing its bond, the MML directors noted that on June 30, Mystic Mountain made a $19.6 million payment to bondholders representing a quarterly interest payment according to the original bond payment schedule. They added that the company was also taking steps to address its insolvency by establishing an escrow account into which the majority shareholder of the parent company had already deposited US$1.1 million.
The MML directors want approval for a creditors meeting on August 9 via videoconference. A main item of discussion would be MML's request for a waiver of an outstanding $38.8 million in interest payments.
The company, in its proposal, has made the case for a resolution to the impasse outside of winding up the operations. It states that in the event of a structured sale of the assets packaged en bloc as a turnkey operation, there would be a “modest” realisation of 57 per cent of the book value of assets, whereas, in a worst-case scenario of distressed or forced sale of the business as a turnkey operation, only 30 per cent of the book value of the assets would be realised.
MML pointed to potential challenges with the asset sale, noting that the company operates from leased premises to which it has made substantial improvements. A buyer, it notes, might not be willing to ascribe value to the improvements or may be unwilling to operate the attraction without an injection of fresh capital. It also suggests that an estimated winding up time period of between 12 and 24 months would not be in the interest of the creditors.
Additionally, MML said that in a winding up and asset sale, a new class of creditors would be due approximately US$1.7 million and would have to be paid as a priority. Redundancy payments of US$500,000, it notes, would also have to be settled before the main legacy bondholders, believed to comprise mainly pensions funds represented by JCSD Trustee Services Limited, could be paid.
JCSD and JCSD Trustee Services Limited General Manager Andrea Kelly said a bondholders meeting originally scheduled for July 22 has been postponed to a date this week for MML's offer to the discussed.