Shoreline investors face two-year wait for return of their money

Thousands of investors who lent €14 million to Shoreline Mall plc on the understanding that their money would be returned this August are now being asked to wait another two years.

In a circular issued ahead of a bondholders’ meeting scheduled for the end of this month, Shoreline confirmed that it is seeking approval to postpone repayment of its 4% Secured Bonds from 1 August 2026 to 1 August 2028.

In return, investors are being offered an increase in the annual coupon from 4% to 6.5%, together with a one-off commitment fee equivalent to 0.25% of the bond’s face value.

The proposal marks a significant setback for bondholders and confirms The Shift’s reporting over recent months that Shoreline was encountering difficulties in redeeming the bonds according to the timetable originally promised when the issue was launched in 2020.

The company is blaming the delay on precautionary garnishee orders obtained by Turkish contractor Koray Global Malta Limited as part of an ongoing dispute involving construction works carried out by another company within the Shoreline group.

In a circular issued to bondholders, Shoreline stated that, although it was not a party to the original contract, the court measures have hindered refinancing efforts and prevented it from implementing plans intended to fund repayment of the bonds.

The bond repayment delay is the latest challenge for a project that has been surrounded by controversy since its inception.

As previously reported by The Shift, the Shoreline development emerged from a series of controversial changes to Smart City’s original masterplan, transforming land initially earmarked for an ICT and business hub into a large-scale luxury residential and commercial project.

Earlier investigations by The Shift also highlighted opaque ownership changes and the involvement of individuals who later became the subject of financial crime investigations.

One of the most notable episodes involved Stephen Carter, who fronted the project in its early years before being removed from the corporate structure shortly before a court freezing order linked to an alleged money laundering investigation was issued in his name.

More recently, the project became embroiled in the fallout from the Vitals hospitals inquiry.

In June 2024, lawyers Kevin Deguara and Jean Carl Farrugia resigned from the boards of Shoreline-related companies shortly after both were charged in connection with the hospitals concession scandal. The two had long been associated with the Shoreline project as shareholders and directors. Their departure triggered a boardroom reshuffle that saw South African businessman Ryan Otto assume a more prominent leadership role within the group.

In its latest announcement, Shoreline insists that its current difficulties are legal rather than financial.

According to the circular issued to bondholders, the Shoreline Mall is now fully operational and enjoying strong commercial performance. Retail sales increased by 18% during the first nine months of the current financial year, reaching €34.3 million, while customer spending per visit rose by more than 11%.

The company also claims that the value of the mall has risen to €81.5 million, significantly above the €70 million valuation projected when the bond issue was launched.

Despite these assurances, investors are still being asked to extend their loan for a further two years.

Shoreline stated that the extension will allow time to conclude arbitration proceedings with Koray, currently expected to run until May 2027, secure the lifting or replacement of the garnishee orders, complete the sale of six luxury villas forming part of the wider development, and finalise refinancing arrangements.

The company said repayment will ultimately come from a combination of villa sales, rental income and refinancing proceeds.

To persuade bondholders, Shoreline is also proposing a dedicated sinking fund into which proceeds from villa sales will be deposited. It said that, once the garnishee orders are removed, rental income generated by the mall would also be paid directly into the fund and reserved exclusively for bond redemptions.

The company further undertook not to repay intercompany debt during the extended term of the bonds and said the existing security over the mall will remain in force.

Bondholders will now decide whether to accept the proposal at a meeting on June 30.