Merkanti bondholders left waiting for interest payment as company scrambles for cash

Merkanti Holding plc bondholders have been left waiting for their interest payment after the company failed to settle the amount when it fell due and is now scrambling to secure bridge financing against the proceeds of an asset sale.

The development raises fresh questions about the financial health of the Malta-listed company and the regulatory oversight by the MFSA of its deteriorating position, months after The Shift first revealed that its banking subsidiary was being wound down.

Merkanti informed the market that the interest payment on its 5.7% secured bonds, due on 12 August, had been delayed. It said it was “working on a solution” and classified the announcement as inside information under EU market abuse rules.

In its latest announcement, Merkanti said it was finalising bridge financing to bring forward proceeds from an asset sale and expected to make the delayed payment within the 60-day grace period provided under the bond’s terms.

The bond itself has already undergone a significant restructuring.

Merkanti originally raised €25 million from investors through a 4% secured bond due in 2026. In 2024, however, bondholders approved changes extending its maturity by seven years to 2033, while the interest rate was increased from 4% to 5.7%. The restructuring therefore spared Merkanti from repaying the €25 million principal this year, although it substantially increased its annual interest bill.

Bondholders had no choice but to accept.

The latest liquidity problems come less than a year after The Shift revealed that Merkanti Bank was preparing to cease operations after a decade in Malta.

Employees had already received termination notices, but at the time neither Merkanti Holding, the bank’s Malta-listed parent, nor its New York-listed ultimate owner, Scully Royalty, had issued a market announcement about the closure.

Sources close to the company told The Shift at the time that the closure was a strategic business decision and that Merkanti Holding’s listed bonds should remain unaffected because they were substantially secured by overseas assets owned by the group.

Yet the company’s latest financial analysis shows that pressure was meanwhile building on its cash position.

Its debt-servicing capacity was already tight.

Interest cover stood at just 1.2 times the interest on the bond in 2025, meaning earnings available to cover interest were only marginally above the interest expense. The ratio was forecast to deteriorate further to 1.1 times this year.

The pressure is compounded by Merkanti Holding’s dependence on income and dividends from companies within the group, while substantial liquidity has simultaneously been advanced to related parties.

Merkanti Bank itself recorded a €3.6 million loss in 2025 as its operations were wound down, while the group’s larger German property subsidiary swung from €1.4 million positive EBITDA in 2024 to negative €610,000 last year.

The developments also raise questions for the Malta Financial Services Authority over the timeliness and adequacy of information provided to investors as Merkanti’s financial position deteriorated.

The Shift has sent questions to the MFSA. So far, the regulator has not reacted to the evolving worrying situation.

Merkanti Bank began operating in Malta in 2016 after securing a licence from the Malta Financial Services Authority. The institution, previously owned by Austria’s BAWAG, offers niche corporate services including factoring, inventory finance, trade finance and bank guarantees, targeting international trade and finance clients.