Mystic Mountain creditors meeting rerun set for Feb 8

The do-over of an August 9, 2021 meeting of creditors of the indebted attraction company Mystic Mountain Limited, MML, to try and arrive at an agreement to pay out secured bondholders and avert being formally declared bankrupt and/or having the secured creditors empowered to assert control of assert to realise their investment, has been set for Tuesday, February 8. The rerun was ordered in a January 18 decision by Supreme Court judge David Batts following an application for clarification by MML-appointed trustee Caydion Campbell, on the recommendation of Supervisor of Insolvency and Government Trustee, retired Supreme Court judge Ferdinand Smith.

“The court’s ruling and clarifications of the issues surrounding a meeting of creditors to consider a proposal made only to secured creditors is welcomed,” Campbell told the Financial Gleaner this week, confirming the new meeting.

Campbell confirmed, too, that an amended proposal is to be filed with the Office of the Supervisor of Insolvency. While noting that the new proposal has not yet been received from MML, the trustee said it was expected that the amended proposal would be directed to secured creditors only.

An earlier proposal, filed in July last year and which was the subject of the August 2021 meeting with JCSD Trustee Services Limited, the representatives of the sole secured creditor Sky-High Holdings Limited, was rejected. A verbal amendment to that proposal made at the meeting was also rejected by Sky-High, who are owed by MML some $1.1 billion in bond interest and principal.

The court, in voiding the August meeting because notice for it had not been circulated to all proven creditors, as stipulated by the Insolvency Act, paved the way for an amended proposal to be file at the rescheduled meeting on February 8.

“The trustee is therefore directed, pursuant to sections 277 and 280 of the Insolvency Act, to convene a meeting of creditors to consider the proposal and any amendments within 21 days of the date of this judgment. The time for which is extended accordingly,” the court ordered.

A Financial Gleaner report published on January 21, while correctly conveying the court order for the meeting of all creditors to be convened within 21 days of the January 18 judgment, had inadvertently suggested that the meeting would have been held in March.

The Office of the Supervisor of Insolvency confirmed to the Financial Gleaner this week that it had received notification of an amended proposal to be filed before the February 8 meeting, but had not yet received the proposal. Deputy Supervisor of Insolvency Fayola Evans Roberts noted that the court ruling allowed for an amended proposal to be put forward.

Campbell would not comment on the prospect of the amended proposal being accepted by the bondholder and/r the unsecured creditors, who are now empowered not only to attend the meeting of creditors, but also to vote on whether or not to accept the proposal.

“I will not speculate on the future prospect for Mystic Mountain Limited or its business ahead of the 8 February, 2022 meeting and any decisions that may be taken thereat,” Campbell told the Financial Gleaner in an emailed response.

“It is further declared that at a meeting to consider a proposal, all proved creditors are entitled to attend in person or by proxy and to vote,” the court ruling said.

The court maintained that the decision to allow all creditors to vote would not disadvantage any class of creditors. It noted that, in the first place, secured creditors may, if the proposal is rejected, proceed to liquidate their securities and effect recovery of sums due to them. It also underscored the fact that, in the case of secured creditors, “an approved proposal which concerns their class is not binding unless accepted by a majority of secured creditors”.

“It bears repeating also that even a proposal which is accepted will not receive the court’s approval if it is not calculated to benefit the general body of creditors,” according to section 42(2)(b) of the Insolvency Act, Batts wrote in the court ruling.

He explained that once there is the rejection of a proposal, the matter is treated as a voluntary assignment of bankruptcy under the Insolvency Act, triggering the appointment of a trustee and a stay of all processes, except those related to secured creditors. In such an event, the matter would eventually revert to the court for a determination.

The Supreme Court judge agreed with the trustee’s lawyers that it would be a rare circumstance in which unsecured creditors would vote against a proposal which kept the debtor in business.

“This is because often the assets, providing the security for the secured creditors, are integral to the generation of income from which unsecured creditors expect to be satisfied. A rejection forcing bankruptcy, all other things being equal, may well see them in a worse or the same situation as if the proposal had been accepted,” Batts said in the judgment, pointing out that the statutory scheme for the rehabilitation of companies facing solvency issues, which appears to be the objective of the insolvency law, is not absurd but rather, appears workable and consistent with the reality of industry and commerce.

The judge also accepted the suggestion of lawyers for Campbell that the purpose of the statutory provision requiring the giving of notice of a creditors meeting to persons to whom a proposal was not been made – in this case, unsecured creditors – enables comment, dialogue, and possibly, the opportunity for unsecured creditors to persuade the secured creditors that there is good reason to approve the proposal.

huntley.medley@gleanerjm.com