Government panics over possible €15 million bond default

A private company that, in 2016, took over a massive maritime site in the Grand Harbour, better known as the Malta Shipbuilding in Marsa, through a questionable government concession, is in deep financial trouble.

According to its auditors, it will not be able to pay back a €15 million public bond, redeemable in 2026, if no fresh financial injection is made.

Given this possible default, which would shock Malta’s limited financial market –  the government, through INDIS Malta, is now contemplating a plan of action involving the termination of the 65-year concession and paying some form of compensation to the failing company to help it pay some of its massive debts.

The Shift is reliably informed that Paul Abela, the Chairman of Mediterranean Maritime Hub plc (MMH) – the company responsible for the bond – and a former Gozo Channel Chairman under a PN administration, has packed his bags and relocated to Spain.

Government sources confirmed with The Shift that negotiations are ongoing between INDIS Malta and MMH to try to settle for the return of the 175,000 square metre site onto the government books.

Negotiations are still at an early stage and no decisions have been made.

The Shift is informed that the PN Opposition is also being consulted on this possible move, which will need parliamentary approval before it goes through.

Maritime industry sources are critical of the government’s intervention at this stage, calling it a ‘bailout’ for a failing private company. They said they were awaiting further developments on how the compensation, if any, would be calculated and what it would mean for Maltese taxpayers.

Since the government kept the concession details secret, it is unclear whether it can terminate the concession without compensation.

The story so far

In 2016, under the direction of Economy Minister Chris Cardona and disgraced former prime minister Joseph Muscat, Malta Shipbuilding’s premises were passed on to MMH Holdings, a company controlled by Gozitan businessman Paul Abela, better known for his company Elesolar, through a 65-year concession.

The concession was not granted through a parliamentary resolution, as is usually the case with such public concessions. Instead, the government directly entered into a contract with Abela, and no details were ever published on the concession’s terms.

No details of any due diligence supposedly undertaken on Abela, his businesses, and his company’s financial position to take over such a large public asset were ever made public.

Initially, the MMH intended to use the former shipbuilding site, which also comprises a dock, for the oil and gas industry. This did not materialise, and the company failed to attract significant business.

MMH was also supposed to invest some €55 million in the facility during the first ten years of the concession.

Instead, contrary to the concession’s terms, Abela started using the site for various other purposes, including the storage and repair of yachts and pleasure boats and the holding of conferences, such as Sigma.

The government looked the other way, irking competitors, including the Manoel Island Yacht Yard, which made an official complaint to the government.

Abela’s company continued to register negative growth, with its auditors warning that MMH was in troubled waters. It registered operational losses of €77,000 and €83,000 in 2021 and 2022.

According to the last published audited accounts, those for 2022, auditors PwC declared that if the company did not obtain alternative financing, it would be difficult to pay back its €15 million bond issue, which will close in 2026.

Attempts for private financial injection fail

In an attempt to shore up the company’s finances, MMH announced in 2023 that it had started talks and reached a provisional settlement with two major Maltese firms: Virtu Ferries, which operates catamaran services to Sicily, and Francis Busuttil & Sons Ltd, better known as Tal-Bandallu and owners of Foster Clarks, to transfer 70% of the company to them and take over the concession.

The two companies approached wanted some changes to the original concession, which would permit them to enter into new business areas not officially allowed by the original concession deed with the government. Following months of talks, MMH announced that negotiations had failed.

This has left MMH in a very vulnerable situation. In less than two years, it will have to pay back the €15 million worth of bonds for which the company has no money. And its owner has left the island.

The company said in a statement last week that it had started talks to terminate the concession. It emphasised that this would be done “in accordance with the provisions set out in the deed, while remaining mindful of the fact that the Grantee (MMH) has ongoing commitments, including to clients and the financial market.

Apart from this company, Paul Abela is a shareholder in Elesolar Company Ltd, Elesolar Holdings Company Ltd, and a director of Abel Energy Ltd, Mainti Sea Support Ltd, for which his family has a shareholding interest.

While Abela is still chairman of MMH Finance PLC. The bondholder, MMH Holdings, which runs the shipbuilding site, is controlled by his children, Angelique, Luisa, and Paul Abela Jr.