MMH bond default may be salvaged as new shareholders close to a deal

Bondholders of a €15 million Mediterranean Maritime Hub bond have been advised to retain their investment, as a deal has been reached to prevent the company from defaulting, The Shift has confirmed.

The main casualty of what could have been a significant shock to Malta’s limited bond market on the Stock Exchange will be Paul Abela, the Gozitan businessman who was granted a 65-year concession by the government in 2016 to transform the former Malta Shipbuilding site into an oil and gas business.

With approximately €30 million in debts, including amounts owed to BOV and APS banks, Abela’s company was on the brink of bankruptcy, lacking the funds to repay a €15 million loan obtained through an unsecured bond that matures next year.

After extensive discussions over the past few weeks, which Prime Minister Robert Abela facilitated, several major business groups, including some in the real estate sector, have agreed to buy out Paul Abela. This deal will help address his mounting debts and protect the interests of his bondholders.

Meanwhile, he’s living in a luxury villa he purchased in Spain.

According to sources close to MMH, a consortium of several major companies is set to take over the concession by purchasing shares from what was originally Paul Abela’s holding company. Abela will retain a 10% share of the holding company that owns the concession, while larger businesses will take control of the operations.

These are shippers Virtu Ferries, tuna magnate Azzopardi Fisheries, and Melita Marine, owned by Pierre Balzan from the maritime sector; logistics and stevedoring company Fahrenheit and Foster Clark, known as ta’ Bandallu; major contractors and developers F.Scembri and Sons, known as tad-Dobbu; Paul Attard of GAP; crane lease company Y&P; and Bonnici Brothers.

While some of the companies buying into the MMH concession are related to the maritime industry, the entry of outsiders GAP, Y&P, and Bonnici is raising questions about whether the concession’s terms will be adapted to suit developers for a real estate project on the waterfront.

However, at least officially, the government has maintained that the concession terms will not change.

Last week, Abela announced that the government had commissioned a reputable firm to create a new master plan for the entire Grand Harbour area, including Marsa, where the significant MMH concession is located.

Industry insiders have interpreted this as Abela’s plan to accommodate the developers’ request for changes to the concession rules.

So far, MMH has not made a company announcement regarding the deal reached.

MMH vs Manoel Island

The issue with the MMH concession also highlights the government’s inconsistency in public land concessions.

Drawing a parallel on how Abela has changed his mind over the Manoel Island concession, accusing MIDI of being in default after 30,000 petitioners called on him to take it back, he did not treat the MMH concession, also in default, with the same yardstick.

It is known that MMH was primarily given to Paul Abela, with limited due diligence, for use in the oil and gas industry.

However, this never materialised, and instead, other non-permitted activities were allowed to take place, including turning parts of the public land into boat storage areas and holding conventions.

Unlike Manoel Island, no legal action was taken by the government to take back the MMH concession. Instead, for some unknown reason, he preferred to back real estate developers and other companies in taking over a public asset through a business transfer deal.

Most of the government’s concessions given during the past three decades – from Smart City to Chambray and many others – did not respect the terms approved by Parliament and are in default.