MFSA silent as Merkanti shifts explanation for missed bond payment

The Malta Financial Services Authority (MFSA) is refusing to say whether it is investigating Merkanti Holding plc as the Malta-listed company changes its explanation for failing to pay its due interest to bondholders on time.

Merkanti’s latest market announcement blamed “administrative and managerial changes” for its failure to settle the annual interest due on its €25 million bond on 12 August.

The company said the changes had affected its ability to access and transfer its own funds. It promised that the full payment would be made by 31 August.

This explanation differs substantially from the one given to bondholders a few days earlier.

On 18 August, Merkanti said it was finalising bridge financing to obtain early access to proceeds from an asset sale. It said the financing should provide the funds needed to settle the outstanding interest within the 60-day grace period permitted under the bond’s terms.

The latest announcement does not refer to the bridge financing or the asset sale.

Instead, Merkanti now says it expects the registration of corporate changes and revised instructions to its bankers to be completed shortly. It said its new management would then be able to access the funds required for the interest payment.

The company has not explained whether the bridge financing and asset sale remain necessary or why investors were originally told that short-term financing was required if the money was already available in its accounts.

The Shift asked the MFSA whether it was investigating the missed payment and when it first became aware that Merkanti could not settle the interest on time.

The regulator was also asked whether it was examining Merkanti’s compliance with the Capital Markets Rules and the EU Market Abuse Regulation, including whether investors received complete and timely information about its liquidity position.

Questions were also raised about substantial advances made by Merkanti and its subsidiaries to ultimate parent Scully Royalty, including interest-free advances, as the group’s liquidity position deteriorated.

The MFSA would not answer any of the questions.

It said only that it assesses “relevant developments and compliance with applicable requirements” but does not comment on the existence, scope or progress of supervisory or enforcement work concerning individual issuers.

Merkanti originally issued a €25 million secured bond carrying 4% interest and repayable this month. In 2024, bondholders approved extending the maturity date by seven years to 2033 while increasing the interest rate to 5.7%.

The extension meant Merkanti did not have to repay the €25 million principal this year. Yet it still failed to make the first full annual interest payment due this month on time.

The company’s financial position had already shown signs of strain.

Its interest cover stood at 1.2 times in 2025 and was forecast to fall to 1.1 times this year.

Merkanti Bank recorded a €3.6 million loss last year as it wound down its operations, while the group’s German property business moved from positive EBITDA of €1.4 million to a negative €610,000.

Despite the changing explanations and missed payment, the MFSA has provided no public assurance that the company’s disclosures, forecasts and related-party transactions are being scrutinised.