MMH bonds losing value as default possibility looms

€15 million in unsecured bonds issued by Mediterranean Maritime Hub Finance plc, due to mature in 2026, registered a loss in value of almost 6% last week.

Investors shed their bonds on the Malta Stock Exchange, fearing a possible default. From a value of €100 per bond, it closed at €95 last Friday. This was the sharpest fall in the bond’s value since its launch in 2016.

The ‘run’ started following a company announcement by MMH – which controls the 65-year concession of the former Malta Shipbuilding – that it has begun talks with the government to terminate its concession.

MMH – controlled by Gozitan businessman Paul Abela, now living in Spain – did not explain why it wanted to end its concession just eight years into its 65-year life.

The Shift reported that the company has been making significant losses over the past years and is in financial trouble.

In its last published accounts in 2022, auditors PwC warned that the company would be unable to pay back its €15 million in loans (bonds) in less than two years if it did not acquire any new capital injection.

If the MMH bonds default, it will be the first for Malta’s financial market history.

The government is expected to negotiate a form of compensation, helping Abela settle his dues while taking back the concession.

The Shift understands that the government has already spoken to the Opposition about this possible deal and that it will be presented to parliament shortly.

Maritime industry sources, including industry players, are sceptical about such a move, complaining that it would amount to a bailout for a private company that has clearly failed in its business venture.

They insist the government has other ways to take back the concession without using public funds to shore up Abela and his family’s business.

The concession was given to Abela in 2016 by disgraced former prime minister Joseph Muscat’s government.

The contract and its conditions signed with Abela were never made public. It is unclear whether INDIS Malta – the government agency responsible for this deal – conducted any enhanced due diligence to establish whether Abela had the means and financial strength to take over this public concession.