Issue link: https://maltatoday.uberflip.com/i/329964
maltatoday, SUNDAY, 15 JUNE 2014 5 News Banks restrict credit, but MFSA makes it easier for bond issuers CONTINUED FROM PAGE 1 Indeed, the figures presented in the prospectus are unlike those in the financial statements that Mariner filed with the MFSA: "The pro forma consolidated financial information addresses a hypothetical situation and therefore does not represent the Group's actual financial position or results as at 31 December, 2013," the prospectus admits. So while the prospectus suggests that Mariner Finance registered a €6,813 profit after tax, its audited financials actually show it has regis- tered €3,625 profit after tax. Indeed, the company, formed back in 2003, did not include any of its au- dited financial statements in the pro- spectus. Instead, Mariner inserted "highlights" from its 2011, 2012, and 2013 financials. The company said in its prospectus that "given the re- structuring of the Group, the histori- cal financial information specific to the issuer is of limited relevance for the purpose of prospective investors making an informed decision as to whether to invest in the bonds." Still more unanswered questions are raised by the timing of the bond issue. Mariner Finance was incor- porated in 2003 when it released a €13 million bond, that was then re- deemed in 2010. In 2013 however, the group had to pay previous bank loans with new bank refinancing of €26 million to pay for the acquisition of its two Riga sea terminals. Then in November 2013, the group underwent a "corporate restructur- ing exercise", with Mariner Finance plc finally becoming the parent com- pany of the Mariner Group in May 2014. But while the group's total assets amount to €36 million in plant and equipment, this actually includes an intangible €13.2 million entered as "goodwill on acquisition" of the two container terminals. Retail clients will ask how substantial total equity is to the bond issue of €30 million. The unsecured bonds will be used for the refinancing of Mariner's ex- isting bank borrowings, possible acquisitions of other ports and lo- gistical facilities, as well as corporate funding of the Group. The Mariner Group plans to ex- pand and grow its container terminal operations through selective acquisi- tions. Geographical preference of potential targets will include regions serviced by the European port sys- tem, such as the UK, the Baltic Sea area and the Mediterranean. "Since we commenced operation of the Baltic Container Terminal in Riga in 1996, the company has grown to be the largest and fastest-growing con- tainer handling facility in the Baltic States," chairman Marin Hili said. "We recently expanded our ware- housing facilities to over 20,000 square metres, and plan to double them over the coming years. Further investment will go towards the ac- quisition of a new ship-to-shore quay crane, which will be commissioned later on this year, as well as increasing the terminal's overall handling capac- ity," Hili said. The bonds are being issued at an in- terest rate of 5.3% payable annually, at an issue price of €100 per bond, and will be redeemed in 2024. Relaxation of rules Retail clients and investors looking at the Malta Stock Exchange will be amazed at the scale of multi-million bond issues authorised by the MFSA over the past years: €270 million is- sued from companies with net asset values as high as €677 million from Corinthia Finance, to as low as €3.27 million for Pendergardens Develop- ment. The restricted credit from banks exercising more cautious lending has meant private companies have had to look elsewhere for the finance needed to expand. But the glut of bond issues was also precipitated by a significant relaxa- tion in the rules for bond issues. Maltese investors responded vo- raciously to recent offerings such as the €20 million in Medserv bonds, the successful oil logistics firm, and another €40 million in bonds from entrepreneur Anglu Xuereb's AX In- vestments. But it was the Malta Financial Serv- ices Authority that caved in to de- mands from businesses to eliminate strict rules, such as having an obliga- tory sinking fund, for example. This led investors in bonds to be at a distinct disadvantage compared to depositors in a bank, who are to some degree protected by a depositor compensation scheme, mandated by EU law, even though this is limited to €100,000 per depositor, per bank. The relaxation in sinking fund rules in 2013 – a sort of 'depositor com- pensation' fund acting as a guarantee – meant that companies could seek financing from the public more easily than go to banks. Under new Basel III rules, banks have been adopting more conserva- tive lending rules and restricting credit to faltering markets such as the construction business: it was obvious that banks were unwilling to finance certain corporate projects, especially when new bond issues were being created to actually fund previous bond issues. Nationalist Party seek ways of tapping into real estate wealth JURGEN BALZAN THE Nationalist Party is set to put a number of its clubs across the country on the market, in a measure aimed to address the party's precari- ous financial situation. MaltaToday has learnt that the PN's higher echelons decided re- cently to put the party's properties up for sale and in comments to Mal- taToday, PN secretary-general Chris Said did not deny this but indicated that the party was looking at max- imising its revenues by renting out unutilised space in its many clubs. "Many of these clubs are located in strategic areas in town and village cores and the party is thus consider- ing better ways to use its properties to give maximum return," he said. MaltaToday can confirm that the PN's executive committee recently resolved to dispense with those clubs that can bring in a consider- able revenue to the party, to settle its debts. Another option would be that of renting out unutilised space to pri- vate companies while keeping hold of the bar and other spaces which are utilized by the local sectional committees. The party has already reached a similar agreement over the Siggiewi club, where a part of the premises is rented out to a bank. A party source said: "The party wants to find possible buyers that will allow the party to use the same premises for occasional meetings." The PN owns 52 properties, apart from the party headquarters in Pi- età, and also manages three clubs on government emphyteusis. These properties are a dormant asset, probably valued in their mil- lions, which have so far remained untapped. Over the years, the function of party clubs has changed and their importance gradually diminished. Before the advent of the digital era and local councils, party clubs were the main contact point for residents and supporters. However, local councils have re- placed the functions previously held by party clubs and MPs and candi- dates' district offices, while television and the internet have revolutionised the way the two main parties com- municate with their supporters and the rest of the country. The two major parties already rent out the bars of their clubs, though this has at times landed them in hot water, with a number of clubs being involved in drug-related incidents. Apart from its headquarters in Pietà, which was rebuilt not so long ago, severely draining the party's resources, selling or renting the PN clubs scattered around the country would provide the party an oppor- tunity to rebrand itself while bring- ing in some much needed cash. Following last year's electoral drubbing the extent of the PN's fi- nancial woes surfaced and although the party has implemented several reforms to address the situation, its finances remain straitened. With debts reaching up to €8 mil- lion, the party's new administration had to deal with the mess inherited from former secretaries-general Joe Saliba and Paul Borg Olivier. In the run-up to the March 2013 election the majority of party em- ployees went unpaid for months and in its restructuring process, the PN laid off a number of them employed by its media organisation and other structures. However, Said sounded a positive note and said that the PN's finances "are definitely in a better position than they were a year ago." He added "today, the Nationalist Party's operations are fully sustain- able and have been so for almost 10 months, and the party has already closed its accounts on the 2014 European Parliament election cam- paign." Looking ahead, the Gozitan MP, who was elected secretary-general in May last year, said "the next im- portant step in consolidating the party's financial position is conclud- ing payments of any outstanding 2013 salaries owed to employees. The party is determined to conclude the payments in question over the summer months, and has brought together its committees, organs, MPs and MEPs to successfully reach this objective". The glut of bond issues was also precipitated by a significant relaxation in the rules for bond issues