Issue link: https://maltatoday.uberflip.com/i/1226904
10 maltatoday | SUNDAY • 29 MARCH 2020 NEWS CONTINUED FROM PAGE 1 In the agreement signed by Mizzi and Steward Healthcare, the government agreed that should the hospitals' conces- sion be terminated by a court of law – for whatever reason, and even if Steward is in breach of contract – such an event would be a government default. That would mean that all debts in- curred by Steward would be passed on to government, and the American com- pany would still be liable for a €100 mil- lion contractual pay-out for its equity. MaltaToday understands the agree- ment has raised concerns inside govern- ment, because the clause might make it impossible for the government to termi- nate the Steward contract. Steward acquired the 30-year conces- sion to run three state hospitals as a private concern in December 2017 from Vitals Global Healthcare, an unknown consortium of medical entrepreneurs granted the concession in 2015. But VGH racked up millions in debt with nothing to show for it, negotiating a buy-out of some €15 million from Stew- ard. Later in 2018, Bank of Valletta grant- ed Steward a €5 million overdraft facil- ity and a €3 million loan; but in August 2019, BOV also consented to a loan of €22 million and another of €5.9 million to two Steward subsidiaries. Apart from placing the hospital lands under Steward's control as guarantees for the debt, the agreement gave Stew- ard unprecedented generosity by ac- cepting that should the concession be rescinded by any law, public order or decision, judgement or decree – effec- tively any government or court decision – such an event will be "a non-rectifiable government of Malta event or default". Government insiders baulked at the agreement, claiming the loan facility and Mizzi's commitment to Steward was unknown to Cabinet colleagues. And that's because the 2019 agree- ment's wording means the government has no wriggle room should Steward be found in breach of the concession by any tribunal: the decision will instantly trig- ger an obligation on government to pay out €100 million in cold cash, and take on any lenders' debt, such as these BOV loans. The American healthcare company was on the verge of being given wider berth on its concession back in Novem- ber 2019, before former prime minister Joseph Muscat lost control of power in the wake of his chief of staff's resigna- tion in connection with the Daphne Caruana Galizia murder investigation. Already the concession obliges the Maltese taxpayer to pay hefty penalties should the government default on the concession: €100 million in cash and any lenders' debt incurred by Steward. But should Steward default on the con- tract and not fulfil its obligations on the St Luke's, Karin Grech, and Gozo hospi- tals, it would 'only' lose its equity – the investment it carried out during the PPP – although government would still have to pay the debt they incurred. Together with Muscat, in November 2019 Steward was close to extending the grounds on which a 'force majeure' or national emergency default might incur, that is, situations where civil strife or war would make the operation unwork- able. In such case, government would be obliged to pay Steward 50% of its equity, but also cover any debt the company in- curred. But Steward wants to add a host of oth- er such 'force majeure' conditions, such as accidental loss or damage, strikes and work-to-rule situations, and even changes in laws such as those affected by EU regulations all situations that tend to affect the ordinary running of any busi- ness. Malta could foot €100 million bill if Steward contract rescinded by court March 2015: the hospitals' concession agreement is preceeded by the memorandum of understanding with Barts to launch an overseas campus at the Gozo General Hospital. Since then, a controversial PPP to Vitals Global Healthcare has given little joy to the State. Apart from debts by VGH which were passed on to Steward, the State also pays the private concern €70 million to run the three hospitals, to the consternation of the Opposition VITALS DEBTS VITALS Global Healthcare was a financial mess in 2017. The mysterious group of inves- tors had clinched a 30-year con- cession to run three Maltese state hospitals in a bogus 'request for proposals' tender run by Project Malta, the privatisation arm un- der former minister Konrad Miz- zi's purview. By mid-2017, VGH was still without the necessary banking fi- nance to take its project forward. Despite the existence of mul- ti-million debts, and now even the suspicion of inflated con- sultancy fees being charged to expenses, VGH's two directors – the Canadian Ram Tumuluri and Briton Mark Pawley – were about to sign off on a very lucra- tive payday. In June 2017, Tumuluri and Pawley signed on a back-dated contract for their remuneration to bind Vitals to pay them exor- bitant directors' fees despite no sign of clear progress on the hos- pitals concession project. Tumuluri's contract was that he be paid €600,000 annually, for the three years since the start of the concession – €1.8 million in total; as well as a €5 million bo- nus for the third year of the con- cession. Even Mark Edward Pawley, whose Bluestone Investments in the British Virgin Islands was set up as the ultimate beneficial owner of the Vitals group, was ensured a higher-than-normal di-rectors' fee: €400,000 annu- ally. The two directors hastily drew up a contract that would pay both of them €1 million each year, on a project which was now destined to fail. Vitals' total liabilities exceeded assets by €27 million, with losses for that year alone amounting to €18 million. But Steward finally paid Pawley and Bluestone a €9 million settlement to take over the concession, which together with Tumuluri's claim amount to just over €15 million paid to the former investors.