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6 maltatoday | SUNDAY • 30 NOVEMBER 2025 NEWS CONTINUES FROM PAGE 1 But now, the company is facing serious liquidity problems that forced it to suspend works on a large social housing project in Luqa, leaving contractors and service providers in the lurch. The problems appear to have started when the company took a strategic decision back in 2017 to involve itself in the develop- ment of social housing through a contractual agreement with the Housing Authority. By 2022, the €58 million in finance that Mal- ita had secured for the housing project from the European In- vestment Bank had already been burnt through and the company was facing a massive funding gap of €60 million to complete the project. The addition of more housing units to the original project, cost overruns as a result of increased construction expenses were blamed for the shortfall. And al- though by end 2024 Malita had managed to secure bank finance to cover most of the shortfall, by June 2025 it was still struggling to bridge the remaining gap. This forced it to suspend works on the Luqa project and not declare an interim dividend pending a re- view of the housing project. MaltaToday went through Malita's annual accounts to understand how the company arrived at this critical juncture that has left private shareholders concerned over the fate of their investment. Born in controversy Malita was constituted in such a way that government must have a minimum shareholding of 70% with the rest being issued to the public and listed on the Mal- ta Stock Exchange. Today, the government holds 81.9% of the company's shares, while private investors hold 18.1%. The com- pany has an issued share capi- tal of 208,206,593 shares worth €104 million. Malita receives funding from public concessions that were passed on to it in 2012 when par- liament approved the transfer of the Malta International Airport and the Valletta Cruise Port con- cessions to the company. This meant Malita would be receiving the rents paid by MIA and VCP for the duration of the respective 65-year lease agreements instead of the government. The then Labour Opposition had criticised the Malita model, insisting it was only intended by the government to skirt around the country's debt, which at the time stood at 72% of GDP—in excess of the EU's 60% threshold. However, the incoming Labour government of 2013 did not rock the boat. Malita continued oper- ating as originally intended—re- ceiving rental income from the lease arrangements with MIA, Valletta Cruise Port, parliament and the open-air theatre in Val- letta, while finalising the works on the City Gate project. Shift to housing But in 2017, Malita shifted its focus to affordable housing pro- jects through an arrangement with the Housing Authority. It was one way of ensuring that a loan of more than €50 million secured from the European In- vestment Bank would not appear as government debt—a déjà vu for those who followed the par- liamentary debates in 2012 with the difference being that the crew had changed. For Malita the cost-benefit analysis made sense. It would fi- nance and build the properties, securing its income by leasing the finished buildings back to the Housing Authority and eventu- ally the individual tenants when the residences are allocated. In December 2017, Malita con- cluded an emphyteutical deed with the Housing Authority to acquire 16 sites across Malta and develop them into residential units and garages for affordable housing purposes. Eventually, one of the sites was dropped and additional units and garages were added on to the other sites. Malita had to build 748 units. Ostensibly, this change in plans skewed the initial financial pro- jections and by year-end 2021, Malita's auditors were already warning of potential liquidity problems. Variations and overruns The company had secured fi- nancing for the project based on the initial estimates but var- iations for various sites, includ- ing the additional number of units, necessitated an increased spend. The auditors noted that the higher spend was approved by the board of directors and management was pursuing op- tions for the additional required financing. "Management also provided appropriate evidence supporting the profitability of the project, subject to curtailment of further cost overruns," the auditors not- ed. The cost overruns would con- tinue to hound the project for the next four years. In the annual report and finan- cial statements for 2022, Mali- ta's directors reported that con- struction work for the sites was complete except for the Luqa site, which was the largest. The report said tenders for the Luqa site would be issued in 2023. A €60m black hole But the directors also revealed that the €58 million in financing for all the project, based on ini- tial estimates, had already been drawn down even though the project was far from finished. Consequently, the board said it had a "financing gap of circa €60 million". The directors explained the higher capital costs in this way: "The increased spend is be- ing incurred as a result of more units being constructed when compared to budgeted plans, in- creased rates for services when compared to original budgeted rates and related increased costs driven by supply chain con- straints currently present in the construction industry." Nonetheless, despite a gaping hole of €60 million, the board said it was "confident that the necessary financing will be se- cured in the coming months to finalise the construction and fin- ishing phases of all mentioned sites". Meanwhile, roll forward 12 months and by the end of 2023, Malita was reporting that the financing gap had now risen to €63 million. This was the capital expenditure required to com- plete the housing project. Plugging the hole During that same year the com- pany tapped into different fund- ing streams to plug the hole. It raised €29.9 million from private financing through a share issue; secured an EIB loan of €22 mil- lion; obtained a €7 million loan from the Council of Europe Development Bank; and was in discussion with a financial in- stitution for a €4 million loan to bridge the rest of the gap. The actual financing had to become available in 2024. What directors described as "a critical development" was the extension of the housing deed by an additional eight years until 2053. This was approved by par- liament's National Audit Public Accounts Committee in October 2023. By 2024, the annual report painted a rosier picture. An ad- ditional 266 housing units had been completed for a total of 392. This represented a threefold increase when compared to De- cember 2023. Malita had also successfully completed the share issue and secured the EIB loan. Directors were confident that the remain- ing €11 million in loans from the Council of Europe Development Bank and another financial insti- tution would materialise. "Discussions with financial in- stitutions are progressing well, and management has received correspondence indicating that the remaining funds amounting to €11 million are conceptually approved, providing confidence in the successful completion of the project across all sites," the directors wrote. No dividend, suspension of works Roll forward to June 2025 and the unaudited interim financial statements restated that some financial arrangements were still being negotiated to address the funding gap. Consequently, on 28 August 2025, Malita's board of directors dropped the bomb. They resolved not to declare an interim dividend to "preserve cash resources" until the end of year results were in. "This decision reflects the com- pany's current strategic position regarding its affordable housing project and the significant cash requirements of the Luqa pro- ject," the directors said, acknowl- edging that Malita had a liquidity problem. The Luqa housing pro- ject is Malita's largest ongoing development, consisting of three blocks expected to be completed in 2026, 2027 and 2028, respec- tively. "The company notes that cash flow requirements for its devel- opment projects have increased beyond original projections due to certain project delays and in- creases in project costs," the di- rectors said, admitting that the company was yet to secure new loans and was also discussing potential changes to the terms of existing facilities. Malita suspends social housing The Malta Investments office