More troubled bonds as boutique hotel company facing difficulties

More negative news is emerging from Malta’s small bond market, as another company has announced that it is facing difficulties in meeting its regulatory obligations.

In a company announcement signed by its chairman and company secretary, Reuben Debono, FES Finance Plc stated that it was still unable to publish its audited financial statements for 2024 and is now working to achieve this goal by the end of November.

It also said that following the resignation of one of its directors months ago, “the company is in discussions with a potential director to fill the vacant position of an independent, non-executive director”, with further updates expected.

FES Finance PLC is the financial arm of FES Projects Ltd. It currently holds a €5 million bond issued in 2019, maturing in 2029, with an interest coupon of 5%. So far, the company has consistently paid interest to its creditors on an annual basis.

It is unclear what led to the latest regulatory impasse, which, however, signals significant challenges.

FES Finance PLC and its guarantor, FES Projects, are owned by Christopher Vella and Reuben Debono. Both are also involved in other companies, including 3514 Capital, which recently acquired millions of non-performing loans from the Bank of Valletta.

According to the 2019 bond issue, the €5 million lent was to be used for the development and management of two boutique hotels: the Euro Guest House in Gzira and another in St. Julian’s.

The last audited accounts, published for 2023 and signed by John Abela of Howarth Malta, show that the company’s asset base amounted to €6.4 million by the end of 2023, consisting mainly of loans totaling €5.6 million.

The auditor opined that, although 88% of the company’s assets are loans, they are still considered recoverable.

The FES bond is the latest of a series currently facing difficulties.

Other, more significant bonds, maturing next year, are also in the red, particularly those related to the Mediterranean Maritime Hub, the DIZZ Group, MIDI, and Shoreline, for different reasons.

So far, no Maltese bond has ever defaulted.

However, Finance Minister Clyde Caruana recently warned that these bonds carry risk and that nothing can be excluded.