Issue link: https://maltatoday.uberflip.com/i/1268420
MATTHEW VELLA HIGH street fashion franchise Melite Retail Group has re- ported business disruptions in its main Italian markets due to the COVID-19 pandemic, and is now asking bondholders to reduce their bond interest rate. The Maltese retail group – owned mainly by the Alf. Miz- zi Group and Lidsdale Limited – holds some 25 leases in the north of Italy for retail stores of the globally known Accessorize and Calvin Klein brands. In 2019, the group issued a €9.25 million bond to finance a restructuring of the group, whose principal activity is the acquisition and sub-leasing of property rights for Italian retail outlets. But the emergence and spread of the COVID-19 pandemic, which severely impacted Italy and sent the entire country into lockdown, caused serious dis- ruption to Melite's 25 proper- ties – which had to shut down as retail business ground to a halt. The company said that the group had been "adversely af- fected by the developments in recent months, to the extent that it has recently informed Melite Properties of the inten- tion to enter into a restructur- ing of its business and debts… in terms of Italian law." The development has now triggered doubts on the recov- erability of the rents due by the group's Italian sister company, which holds 21 of the group's 25 leases. "Management is already in the process of seeking alter- native tenants for a number of the properties… in the interim, the continued and regular pay- ment of rents to landlords is imperative to ensure that Melite Properties retains such property rights, the principal asset held by the business." Indeed, at a valuation of some €10 million, it is these property rights which constitute the val- ue of the security for the €9.25 million bond issue. The company has now an- nounced it will carry out a re- structuring plan to preserve the majority of its property rights, but that will involve first the re- cession of nine out of 25 leases. Additionally, the shareholders of parent company Melita Re- tail will advance €1.1 million as part-capital contribution to the company (€630,000) that will be repayable at the option of the company after the 2028 bonds are redeemed; and €470,000 in a non-interest loan, repayable within five years. The group will also be taking recourse to the COVID Guar- antee Scheme offered by the Malta Development Bank, for a €449,000 loan to fund the forth- coming bond interest payments in November 2020. However, the group also want to ask bondholders to reduce the bond interest rate from 4.85% to 3.5% as from Novem- ber 2021. This will require hold- ing a bondholders meeting. Melite's directors – Andrew and Christian Ganado, Jacque- line Briffa, Alan Frendo Jones, Stanley Portelli and Paul Mer- cieca – said they had reasonable expectation that the company had adequate resources to con- tinue operating. But the ability of the company to continue as a going concern also depends on winning bondholder approval for the changes in the bond in- terest rate, as well as any chang- es to the value of the security underpinning the bond. Since the lifting of measures such as the forced closure of retail stores in May, stores have gradually reopened. Melite's directors said they were in con- stant contact with landlords with a view to safeguarding the company's property right over the stores it plans on retaining, and that they were in negotia- tions with third-party tenants with a view to replacing Melite Italia srl as sub-lessee for such stores. mvella@mediatoday.com.mt 6 maltatoday | SUNDAY • 12 JULY 2020 NEWS Italy lockdown hits hard Malta fashion franchisee Melite Retail Group to request bondholders to reduce bond interest rate after COVID-19 shut down retail trade in Italy