Shoreline bondholders back two-year repayment delay as contractor disputes company’s claims

Investors in Shoreline Mall plc have overwhelmingly approved the company’s controversial request to postpone the repayment of its €14 million bond by two years, despite an escalating public dispute over the reasons behind the restructuring.

At a bondholders’ meeting held on Tuesday, investors voted by 95.65% in favour of extending the redemption date of the 4% Secured Bonds from 1 August 2026 to 1 August 2028. The company also secured approval to increase the annual coupon from 4% to 6.5%, while bondholders will receive a one-off commitment fee equivalent to 0.25% of their investment.

As part of the revised terms, Shoreline also committed not to repay or lend money to other companies within the Shoreline group until the bonds are redeemed. It further pledged to establish a dedicated sinking fund, administered by the security trustee, into which proceeds from villa sales and shopping mall rental income will be deposited once precautionary garnishee orders are lifted.

The approval comes just hours after Turkish contractor Koray Global Malta Ltd publicly challenged Shoreline’s explanation for the delay, rejecting the company’s repeated claims that court-issued garnishee orders obtained by the contractor were principally responsible for its inability to refinance the bond.

In a detailed statement issued ahead of the vote, Koray insisted that Shoreline’s financial difficulties had existed long before the legal dispute between the two parties and argued that the court orders merely sought to safeguard its rights while arbitration proceedings continue.

The contractor also disclosed for the first time that only around €524,000 in rental income had been collected through the garnishee orders since they were extended to shopping mall tenants last year, arguing that such an amount could not realistically explain why a company was unable to repay a €14 million bond.

Koray suggested that the figures point to one of two possibilities: either the mall’s commercial performance is significantly weaker than represented by Shoreline, or rental income has been channelled outside the companies covered by the court order.

While stopping short of making a direct allegation, the contractor said that, if the latter were proven, it could raise serious legal questions regarding compliance with the court’s orders.

The company also revealed that it had already submitted documentary evidence to the Malta Financial Services Authority, including information indicating that Shoreline group entities had previously represented that alternative financing arrangements existed to meet the bond repayment obligations.

The public exchange marks a significant escalation in the dispute surrounding one of Malta’s largest private real estate developments.

Earlier this month, Shoreline had informed bondholders that it required additional time to repay the bonds because precautionary garnishee orders had disrupted refinancing plans. While insisting that the shopping mall remained financially sound, with improved trading performance and a higher valuation, the company argued that the legal action had created temporary obstacles beyond its control.

Koray has categorically rejected that explanation, maintaining that the legal dispute was itself a consequence of Shoreline’s long-standing financial difficulties rather than their cause.

Despite the contractor’s last-minute intervention and the questions raised over Shoreline’s financial position, bondholders overwhelmingly backed management’s proposal, effectively giving the company an additional two years to refinance or generate sufficient funds to honour its obligations.