By Marcelo Teixeira
NEW YORK (Reuters) -Mercon Coffee Group, one of the world’s largest coffee traders, has filed for bankruptcy protection in the U.S. due to what it defined as “exceptionally challenging operating environment,” according to a document seen by Reuters.
Mercon, which has operations in all the major producing regions including Brazil, Vietnam and Central America, said in a letter sent to clients that problems in recent years such as the logistical disruption during the pandemic, frost and drought in Brazil, price volatility, and rising interest rates all combined to hurt the company’s financial situation.
In the letter, signed by Mercon’s Chief Executive Oscar Sevilla, the company said lenders have elected “not to extend credit agreements, resulting in extremely tight working capital conditions.”
Court documents from the U.S. Bankruptcy Court for the Southern District of New York show Mercon and its affiliates in several countries have a total debt of $363 million.
Among the largest creditors are several banks in the countries where Mercon operates, but also trade companies in Brazil, Central America and the United States.
Rumors of financial problems at the coffee trader, which has sales operations in Europe, Asia and the United States, circulated among some market participants in the last hours.
The comments followed news from Nicaragua that the country’s largest coffee exporter, CISA Exportadora, had closed doors. CISA was a subsidiary of Mercon.
In a statement, Nicaragua’s government said it was aware of CISA’s suspension of operations and bankruptcy, which it added was “not just occurring in Nicaragua” and was “foreign” to the country’s current economic situation.
The government said it was working with the coffee sector, as well as with foreign countries, to ensure the sale and export of Nicaraguan coffee.
“We are doing everything in accordance with our laws and constitution that we need to do to ensure that CISA Exportadora meets its business and financial commitments,” it said.
One broker, who asked not to be named due to the sensitivity of the issue, told Reuters that Mercon was in a difficult financial situation after failing to extend credit lines for its trading operations, particularly with Dutch bank Rabobank.
Rabobank confirmed Mercon was a client, but declined to comment further on the situation.
Mercon said in the letter that it will work with clients to “ensure a seamless process concerning open contracts.”
A Mercon source said the company had stocks and will continue to operate under bankruptcy protection, moving coffee from its warehouses and shipping it to buyers.
(Reporting by Marcelo Teixeira; additional reporting by Ismael Lopez, Editing by Franklin Paul, David Evans and David Gregorio)