Trading of MMH (Mediterranean Maritime Hub) bonds on the Malta Stock Exchange has been suspended. The struggling company, which received a government concession in 2016, has failed to submit its annual financial reports, thus violating listing rules.
A spokesman for the Malta Stock Exchange confirmed the suspension, stating that the decision was made by the Malta Financial Services Authority (MFSA) and will remain in effect at least until the end of this month.
The Shift has been informed that the suspension of trading may be extended until the company, controlled by Gozitan entrepreneur Paul Abela, presents its financial reports.
In a recent company announcement, MMH confirmed that its bonds were not trading and acknowledged that it could not present its financial accounts for the previous year on time.
Confirming The Shift’s reports, MMH stated that it was in discussions with a financial institution and several investors to refinance its operations.
According to sources, discussions are ongoing between Bank of Valletta (BOV) and several contractors interested in purchasing shares in Paul Abela’s company to prevent it from facing almost certain bankruptcy.
However, the contractors are requesting the government to amend the terms of the 65-year concession. They want to use the site for non-maritime purposes, including real estate development, and to convert part of the extensive area into a full cargo operation.
Prime Minister Robert Abela, who has close ties with some of the contractors involved—particularly Bonnici Group and Paul Attard of GAP—is engaging in these discussions. Still, he has not made any commitments or guarantees.
The other contractors involved include F.Schembri and Sons (id-Dobbu), Y&P (a crane hire company), and Famalco/Fahrenheit, which is based in Attard and specialises in logistics.
The Shift has previously reported that MMH is significantly underfunded and unable to repay its lenders when its bond matures next year. The company must secure a fresh injection of funds from new investors to meet its obligations.
The potential collapse of a bond on Malta’s limited stock exchange is causing concern. It could trigger a ripple effect affecting other companies with listed bonds, some of which have balance sheets that are not much stronger than those of MMH.
No deal has been finalised between Paul Abela, the contractors, and BOV. Meanwhile, Abela relocated from Malta a few years ago and resides in a luxurious mansion he purchased in southern Spain.
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Piraterija.
This particular ‘investment’ apart, anyone following Company bonds on the MSE. will surely have noticed that rarely, if ever, has a bond been repaid at maturity.
This is an indication that Company projections have not been realised and cash which was supposed to have been set aside for amortisation of the bond did not materialise. The Company involved, either did not generate the free cash flow or else used the money for current expenditure or capex, this to the detriment of the bondholders who need to have their money back at maturity. A rollover of the bond becomes a requirement to avoid default. A default would mean that any other bonds issued in the same name will also be in default and bondholders may demand all their money back at once. . Effectively this would be a disaster for the issuer Company. Rolling over a bond is an ‘abuse’, somewhat! This ‘abuse’ is common in Malta, because the issuers of these bonds know that there is excess cash in Malta’s economy and majority of their investors do not need their money back. So they go along with the rollover.
As far as I am aware, one particular big Company in the Tourism industry has never repaid its bonds. It usually issues another one to repay the previous one. This practice will only hold if there is enough money in the economy to feed it.
So, my advice to investors………..watch out for Companies who do not pay back the bonds value at maturity. It either hasn’t the money or has used it for other purposes. In most cases, this is not a crucial event, like bankruptcy, but it does mean what I stated in my previous sentence and that bondholders are being held for ‘ransom’ the Company.