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maltatoday, WEDNESDAY, 6 JULY 2016 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way Midi bondholders could feel some Brexit pain Matthew Vella Brexit may have punished existing Midi plc bondholders who intend replacing existing bonds with part of the new 4% 2026 bond issue. The new €50 million issue by the Tigné Point Developments will pay off maturing bonds worth around €40.8 million, as well as other obligations and general maintenance and restoration work. As spotted by independent business consultant Kyle Debono, some of the existing bonds being replaced are denominated in British pound sterling. That means the conversion rate for the GBP bonds – since the new ones will be issued solely in euros – was established after the Brexit referendum at €1 to £0.834, which means GBP bondholders got a rotten deal on the exchange. "On top of that existing holders who used to earn 7% will not be earning 7% until December, which is the actual maturity date of the existing bonds. If existing bondholders invest into the new bond they will start earning 4% from when it is issued and forgo the difference in rates until December," Debono says. Of course, Debono adds, nobody knew the outcome of the Brexit referendum when the sentiment right up to the eve of the plebiscite was that the UK would remain in. "Clients with GBP bonds may still keep the bonds until maturity in December, earn 7% and then convert the bonds – or remain in GBP. The currency risk was always a factor that everyone was aware of. They would just lose the opportunity to invest into the new 4% bonds." Midi's €50 million bond issue will be secured by a special hypothec over the commercial property, car parking spaces, storage rooms, shares in T14 Ltd and other property earmarked for development owned by Midi. Interest will be paid annually and the bonds will mature in 2026. Minimum subscription amount is €2,000. The company will be giving preference to its shareholders and the bondholders of the 7% 2016/18 bonds who will have the opportunity to exchange all or part of their holdings in the maturing bonds to the new 4% bonds. European Commission proposes conclusion of EU-Canada free trade deal The European Commission has for- mally proposed to the EU Council the signature and conclusion of a free trade agreement with Canada. EC president Jean-Claude Juncker said that the Comprehensive Economic and Trade Agreement (CETA) should be ratified by national parliaments. "The trade agreement between the EU and Canada is our best and most progressive trade agreement and I want it to enter into force as soon as possible," he said in a statement. "It provides new opportunities for European countries, while promoting our high standards for the benefit of citizens. I have looked at the legal agreements and I have listened to heads of state and to national parliaments. Now it is time to deliver; the credibility of Europe's trade policy is at stake." He said that the deal would benefit European citizens and businesses by scrapping customs duties, saving hundreds of millions of euros a year in duty payments and therefore reducing prices and increasing choice of products imported from Canada. It will make it easier for service suppliers to travel between the EU and Canada, facilitate the recognition of professional qualifications for regulated professions, and allow EU companies to bid for Canadian public contracts at all levels of government. It will also see both the EU and Canada mutually recognizing each other's "conformity assessment certificates". "Therefore, if an EU firm wants to export toys it will only need to get its product tested once, in Europe, to obtain a certificate valid for Canada, thus saving time and money," the EC said. The CETA will also establish a new investment court system, while both sides have pledged not to undermine the EU's labour and environmental standards for the sake of commercial interests. "The agreement reached with Canada is a milestone in European trade policy. It is the most ambitious trade agreement that the EU has ever concluded and will deepen our longstanding relations with Canada," EU trade commissioner Cecilia Malmstrom said. "It will help to generate much-needed growth and jobs while fully upholding Europe's high standards in areas like food safety, environmental protection and people's rights at work." Market Commentary: European shares sink, but precious metals shine The post-Brexit recovery across European markets stalled on Mon- day, as fi nancials, housing shares and retailers traded in the red. This led investors to fl ee towards safe- haven assets, causing demand for precious metals to reap the ben- efi ts and help the price of silver surge to a near two year high. In Asia, traders acted upon hopes that the bank of Japan will further loosen its monetary policy, caus- ing the major index's to rise and trade in positive territory. Mean- while, Wall Street didn't witness much action on Monday as trading was subdued, with U.S markets closed for the Independence Day holiday. Italian banks opened the week on the wrong foot. Banca Monte dei Paschi di Siena shares were slammed to an all-time low on Monday, highlighting the suffering among Italian bank stocks this year, as the sector grapples with bad loans on its books and ultra- low interest rates. This move was infact the result of a report showing that the European Central Bank is pushing the lender to draft a new plan aimed at reducing its non- performing loans. Other Italian banks were also lower. Banca Popolare dell'Emilia Romagna lost 6.15% and Intesa Sanpaolo was down 3.1%. It was also a rough day in the automobile industry. Shares in Volkswagen were 2.2% lower, after the German car maker rejected demands to pay compensation to European car owners who bought tainted diesel vehicles. Other automobile manufacturers also took a hit, with BMW losing 1.58% and Renault down almost 4%. Marks and Spencer was having a bad day following a ratings downgrade from hold to buy. This led shares to tank as much as 5% during Monday's session. Other retailers were also falling. Shares in Next and Burberry traded 2.77% and 1.54% lower respectively. London Stock Exchange Group Plc shareholders put pen to paper on Monday, and approved a $30 billion planned tie-up with Deutsche Borse. This was a big step towards the deal's completion, which had recently been facing uncertainty following the Brexit decision. However, both exchanges issued a joint statement to express their commitment to the agreed terms and continue working to seal the deal. Mining shares occupied the top spots on the FTSE 100, as metal prices rose. Gold was up more than 1% and silver gained close to 5%. Shares in precious metals producers Fresnillio and Randgold were reaping the benefits of this, as shares soared over 5%. Gold and other raw materials would benefit if the UK's 23 June vote to leave the EU triggered further stimulus from the European Central Bank and Bank of Japan, as well as killing off speculation that the Federal Reserve will raise interest rates this year. Global equities last week rallied by the most in four months as policy makers worldwide sought to reassure investors they would take steps to limit the economic fallout of so-called Brexit and ensure financial markets kept functioning. The securities tumbled by the most since 2008 on the day after Britain's referendum. An element of caution is likely to linger throughout the week, with the Bank of England scheduled to publish its quarterly financial stability report of Tuesday. On Wednesday, the Federal Open Market Committee minutes from its June meeting are due, followed by the closely watched nonfarm payrolls report on Friday. Elevated view of the Med: Tigne Point Developments