Issue link: https://maltatoday.uberflip.com/i/1424528
maltatoday | SUNDAY • 31 OCTOBER 2021 NEWS 11 Thank you... for having bought this newspaper mt The good news is that we're not raising the price of our newspaper We know times are still hard, but we have pledged to keep giving our readers quality news they deserve, without making you pay more for it. So thank you, for making it your MaltaToday Support your favourite newspaper with a special offer on online PDF subscriptions. Visit bit.ly/2X9csmr or scan the QR code Subscriptions can be done online on agendabookshop.com Same-day delivery at €1 for orders up to 5 newspapers per address. Subscribe from €1.15 a week Same-day print delivery from Miller Distributors not met as the company was finding difficulty publishing its interim accounts for end-June. By then, the company's equity had been wiped out; were it not for a legal notice issued at the peak of the COVID pandemic, creditors could have petitioned the courts for a compulsory winding-up order. The only executive director at subsidiary Melite Properties, Andrew Ganado, has since re- signed from Melita Finance, with sources claiming Ganado had fallen out with sharehold- ers and remaining board mem- bers. His administrative work has since been performed by company auditors Pricewater- houseCoopers, who also pro- vide consulting services to the company and its shareholders. In spite of this dual role from PwC, the audit firm was not prepared to subscribe to the going concern assumption for Melite Finance's interim accounts. Trading in Melite bonds was suspended when the June financials were not published by the 30 Septem- ber. When they were finally is- sued on 18 October, they came without the customary auditor review. The interims revealed much of what was to be expected: the recurring losses of the group had resulted in a situa- tion where shareholders' eq- uity has been completely can- celled, with a net asset deficit of €745,000. The group suffered a massive drop in rental revenues be- tween January and June 2021, down to €487,000 (€1.14m in 2020), leading to a gross loss of €709,000 due to the closure of outlets during the COVID-19 pandemic. Total pre-tax losses climbed to €1.98m after im- pairments on receivables and the value of leasehold premia. Neither operating cash flows nor the committed funding from Melite's shareholders, will be sufficient to service Melite's debt servicing com- mitments. "In the event that the bondholders do not ap- prove the proposed reduction in the bond interest coupon, the directors expect that the basis of preparation of finan- cial information would need to be amended to a break-up ba- sis," Melite Finance said in the financial statements. "These amendments would include revising the carrying value of the intangible assets to a forced sale basis, and fur- thermore an assessment of contractual obligations would need to be carried out which might result in the consequen- tial recognition of other liabili- ties which are not yet known or reflected. "These factors indicate the existence of a material uncer- tainty, which may cast signifi- cant doubt on the ability of the Group to continue as a going concern." In its circular of 18 October, Melita Finance said no further equity capital was being pro- posed to be put in by the share- holders of the company in or- der to address the capital and liquidity deficit. Stockbroker Paul Bonello has been brutally candid in his assessment of the Melite re- quests. "The shareholders have the cheek of even expecting the repayment of infinitesimally small loans, in priority to the bondholders." And according to a circular from security trustee to the shareholders, Alter Domus, the company would have failed to respond to legitimate expres- sions of concern by the trustee. "Melite's proposals are in- deed very dangerous because they set a precedent of a moral hazard whereby when so-called risk entrepreneurs get it wrong they can expect to restruc- ture a company whereby they make no sacrifices and expect all from the creditors," Bonello said. "Nothing in the track record of this company and its direc- tors, and in their arrogant and entitled attitude, inspires trust and faith. For the good of the bondholders, and indeed of the greater interest of the market, the proposals of the Board de- serve nothing other than the thumbs down by way of an out- right rejection."