Issue link: https://maltatoday.uberflip.com/i/1195815
19 LETTERS & EDITORIAL maltatoday | SUNDAY • 22 DECEMBER 2019 Mikiel Galea Letters & Clarifications Futura and Vatican lawsuit WE write on behalf of Futura Funds Sicav p.l.c., Futura Investment Man- agement Limited, Optimum Evolution Fund SIF, Optimum Asset Manage- ment SA and Mr Alberto Matta and make reference to the 14 December 2019 article 'Vatican chases millions in bid to stop "abusive" sale'. It is very evident that the article reiterates uncritically the contents of an injunction recently filed by the Is- tituto per le Opere di Religione [IOR], without taking into account the strong rebuttal filed by our clients contesting the spurious claims of IOR. IOR alleges that it was "duped" into paying an inflated price for the Buda- pest Exchange Palace, with the result- ing mark-up diverted to third-party entities. This is manifestly false. Indeed, despite IOR's allegations about a lack of transparency, the de- tails of the transaction were clearly indicated by our clients to IOR prior to the execution of the investment. The decision to approve the higher acquisition price of €32 million (in- stead of a more risky transaction struc- ture but with lower entry price) was taken by the investment committee set up by IOR. So much for "intrigue" and "suspicious transactions"! In detail: IOR, and the investment committee it had itself set up, was offered by our clients the opportunity to invest €20.4 million directly into a non-performing loan, with a view to eventually try to convert this into a majority share in the company owning the Budapest Exchange Building, or alternatively wait for the liquidation process to run its course (resulting from the bunruptcy of the borrower) and hopefully recover an amount equal to the full notional of the loan. IOR, however, made it clear that it would not invest into a non-perform- ing loan (with bankruptcy proceedings of the borrower already ongoing and a liquidator having been appointed by the Hungarian Insolvency Courts), since it deemed that this was a risky and reputationally problematic instru- ment. IOR, through its advisors, stated that it would have preferred to acquire the asset once this had been de-risked, that is, after the bankruptcy deactivated, to then invest into the underlying prop- erty or a "cleaned-up" asset. For this to happen, however, third party investors had to be found who would be willing to acquire the NPL, assume the related risks (which IOR was unwilling to assume), and attempt to achieve the termination of the liqui- dation proceedings and then convert the loan into shares of the company owning the building (by potentially agreeing to a settlement with the credi- tor company). Naturally, the price of the unen- cumbered asset was much higher than the price of the NPL with its inherent risks. In fact, the Budapest Exchange Building was appraised by internation- al valuation experts Jones Lang Lasalle at much higher than the €32 million which IOR committed to invest (and of which only €17 million were ultimately invested). The truth is that IOR defaulted on its undisputable contractual obligations and has been trying in every possible way to find legal ground in order to avoid the inevitable and severe conse- quences of this. Therefore, our clients strongly reject the allegation that such a transparent process, clearly put forward to IOR and its investment committee prior to execution (and approved by the lat- ter), could be considered a "suspicious transaction". What is, indeed "suspicious", is the fact that our clients are being attacked for an investment decision which was openly discussed with and, ultimately, decided upon by IOR's investment committee and external advisors. In this respect, we believe the tim- ing of the decision is highly significant. The investment took place only a few weeks prior to the unexpected and unprecedented resignation of Pope Benedict XVI. The election of Pope Francis led to major changes with IOR including, since 2013, the replacement of three Chairmen, two Directors- General, most of the internal senior functions and even many members of the Cardinals Commission. New management launched a scath- ing critique of the previous manage- ment of the Institute and, particularly, the former DG Paolo Cipriani and his deputy Massimo Tulli, against whom the IOR has brought legal proceedings before the Vatican Tribunal and in Italy. The Institute's real goal is not to pro- tect its investment. On the contrary, our client contends that, through its actions, not least its refusal to honour a €24 million residual capital com- mitment pivotal in the development of this major real estate project, IOR is consciously putting the Hungarian investment at risk, to strengthen its allegations of mismanagement against Cipriani and Tulli. It is, to say the least, unfortunate, that our clients have ended up in the crossfire between various factions within IOR, with the Institute blithely unconcerned about the reputation of our clients, the success of its invest- ment and the rights of other third-par- ty investors in the same project, which have nothing to do with the ongoing dispute! Mamo TCV Advocates