Manoel Island: Abela’s populist U-turn endangers 3,000 bondholders as bank, partner pull out

MIDI Plc bondholders, with an outstanding loan of €50 million, have been put into a very fragile position following Prime Minister Robert Abela’s spectacular and populist U-turn to initiate the process to terminate the 99-year concession related to the Manoel Island development.

MIDI, which held its annual general meeting last week, informed some 3,000 bondholders that an unnamed banking institution, which had already agreed to finance part of the outstanding bonds due to mature next year, and Anton Camilleri, known as Tal-Franċiż, who was going to be the strategic partner in the project, have pulled out as a consequence of the government’s declarations that the project is dead.

This rapid development has left MIDI without a banking agreement and a project partner, leaving its bondholders exposed to a possible default next year. In a company announcement, MIDI referred to ‘the difficulties it has suddenly encountered’.

Declaring that it has lost its bond financing from the bank, “for which a term sheet had already been secured” and “the strategic investor”, it said that its plan and agreements “can no longer be pursued”.

“In light of the new circumstances, this strategy is under review and will be influenced by the outcome of ongoing discussions with the government.”

“It is the company’s intention that compensation received from the termination of the Manoel Island concession will be first applied to meet the company’s repayment obligations under the bond,” the company added.

Financial experts familiar with the matter who spoke to The Shift described the government’s rushed and populist decision as “dangerous” and “ill-thought”.

While arguing that it was nice that the island would be turned into a park, they warned that this would have financial consequences.

“It is obvious that the Prime Minister changed his position on the development only because of a 30,000-petition and not on principle.”

Just a week before attacking MIDI, Abela ruled out ending the concession.

“Even if it were true that the concession’s terms were broken, something which the company contests, was this the only one in Malta?” one source said, citing similar concessions to the Mediterranean Maritime Hub, Smart City, industrial factories and others as a few of many examples.

Experts said that while playing the populist, Abela didn’t realise that it would be his government (taxpayers) who would ultimately fork out the bond repayment; he is now negotiating with MIDI.

The Shift is informed that negotiations on compensation, which include what MIDI has spent so far on Manoel Island and its restoration, are still in their infancy. No formal submissions have been made yet.

Asked for the price tag they are expecting, a spokesman for MIDI told The Shift that no figures have been presented yet as the process was still ongoing.

Negotiations are not expected to take very long, as the government is well aware that a default on a €50 million bond will wreak havoc in the market and create serious political repercussions for Prime Minister Robert Abela.

Many were surprised by MIDI’s swift reaction to give in without a fight. Sources consulted by The Shift indicated that MIDI’s principal shareholders – many of whom are seasoned businessmen – realised that the real estate market had undergone significant changes. The project, which would have required an investment of around €500 million, was no longer necessarily worthwhile in terms of profit.

A spokesperson for MIDI told The Shift the project could not be realised without the government’s support.