Grand Harbour Marina plc - Details of New Bond Issue

Wednesday, June 28th, 2017

On 28 June 2017, Grand Harbour Marina plc published a Prospectus following regulatory approval for the issuance of €15 million 4.50% unsecured bonds maturing in 2027.

The salient details of the new bond issue are as follows:

Coupon:

4.50%

Amount Offered:

€15 million

Issue Price:

100% (par)

Interest Payment Date:

Semi-annually on 22 February and 22 August (first interest payment date is 22 February 2018)

Maturity:

The bonds will mature at 100% (par) on 23 August 2027.

Status:

The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer, and shall at all times rank equally, without any priority or preference, with all other present and future unsecured obligations of the Issuer. However, the bonds will rank after all present and future secured borrowings.

Use of Proceeds:

The net proceeds from this Bond issue, estimated at approximately €14.55 million after issuance costs, will be used by the Issuer for the following purposes:

(i) up to €11 million will be used to finance the redemption of the outstanding 7% bonds that will be redeemed on 21 August 2017;

(ii) a maximum of €3.5 million will be used to finance further waterside investment as well as any other possible investments that fall within the Company’s wider investment objectives;

(iii) the balance will be utilised for general corporate funding purposes.

Deadline for ‘Existing Bondholders’:

Tuesday 1 August 2017 at 17:00 hrs with applications for a minimum of €2,000 and in multiples of €100 thereafter.

‘Existing Bondholders’ are holders of the 7.0% Grand Harbour Marina plc 2017/20 bond as at the close of trading on 21 June 2017.

Interested applicants are kindly requested to contact us for further information on the application procedure.

Deadline for ‘Shareholders’:

Tuesday 8 August 2017 at 17:00 hrs with applications for a minimum of €2,000 and in multiples of €100 thereafter.

‘Shareholders’ as at the close of trading on 21 June 2017 are eligible to apply for this new bond issue.

Interested applicants are kindly requested to contact us for further information on the application procedure.

Listing:

Official List of the Malta Stock Exchange

Risk Factors:

Prospective investors are urged to read the Prospectus issued by Grand Harbour Marina plc dated 26 June 2017 including the Risk Factors which are found in the Registration Document on pages 24 to 29 and in Section 2 of the Securities Note found on pages 58 and 59. The below is a summary as contained in the Summary Note however the below does not replace the need for Prospective investors to read all the Risk Factors mentioned in the Prospectus as aforesaid.

Holding of a bond involves certain risks. Prospective investors should carefully consider, with their own independent financial and other professional advisers, the following risk factors and other investment considerations, as well as all the other information contained in the Prospectus before deciding to acquire the Bonds. Prospective investors are warned that by investing in the Bonds they may be exposing themselves to significant risks that may have the consequence of losing a substantial part or all of their in vestment.

The Prospectus contains statements that are, or may be deemed to be, “forward-looking statements”, which relate to matters that are not historical facts and which may involve projections of future circumstances. These forward-looking statements are subject to a number of risks, uncertainties and assumptions and important factors that could cause actual risks to differ materially from the expectations of the Issuer’s and Guarantor’s respective directors. No assurance is given that the future results or expectations will be achieved.

An investment in the Issuer and the Bonds may not be suitable for all recipients of the Prospectus and prospective investors are urged to consult an independent investment adviser licensed under the Investment Services Act as to the suitability or otherwise of an investment in the Bonds before making an investment decision.

Below is a summary of the principal risks associated with an investment in the Issuer and the Bonds – there may be other risks which are not mentioned in this summary. 

Essential information on the key risks specific to the Issuer:

i. The Issuer is highly susceptible to the economic trends that may from time to time be felt in Malta and internationally, including fluctuations in consumer demand, financial market volatility, inflation, the property market, interest rates, exchange rates, direct and indirect taxation, wage rates, utility costs, government spending and budget priorities and other general market, economic, political and social factors.

ii.The Issuer believes that its growth is partially attributable to the efforts and abilities of the members of its senior management team and other key personnel. If one or more of the members of this team were unable or unwilling to continue in their present position, the Issuer might not be able to replace them within the short term, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations.

iii. CNMI is considered important to the success of the Issuer and any dilution of its influence over the Issuer and its business could have a material adverse effect on the Issuer. There can be no assurance that the Parent will not at any time during the term of the Bonds dispose of any interest in the Company.

iv. The integration and operation of acquired businesses may disrupt the Issuer’s business and create additional expenses, and the Issuer may not achieve the anticipated benefits of the acquisitions.

v. The Issuer may not be able to secure sufficient financing for its future operations and investments. Failure to obtain, or delays in obtaining the capital required to complete current or future developments and investments on commercially reasonable terms, including increases in borrowing costs or decreases in loan availability, may limit the Issuer’s growth and materially and adversely affect its business, financial condition, results of operations and prospects. In addition, the Issuer may be exposed to a variety of financial risks associated with the unpredictability inherent in financial markets.

vi. There can be no guarantee that the investment objectives of the Issuer will be met. The ability of the Issuer to implement its strategy in an effective and efficient manner may be limited by its ability to source appropriate opportunities in which to invest, inside and outside of Malta. Furthermore, the Issuer’s investments may be held through joint arrangements with third parties, meaning that the ownership and control of such assets is shared with such third parties. Disputes may arise between the Issuer and third party partners, which could mean that the Issuer may not be able to manage or deal with a particular investment in the way it would wish and this may adversely affect the Issuer’s results of operations. 

vii. Forecasts are inherently subject to the risks of adverse unexpected events, which may affect the revenue streams, and profitability of the Issuer. Forecasts are therefore merely an illustration of a possible future outcome, which may or may not occur and the Issuer, its directors, officers and advisers make no representation as to their accuracy or likelihood of occurrence.

viii. Historically, the Issuer has maintained insurance at levels determined by the Issuer to be appropriate in light of the cost of cover and the risk profiles of the business in which the Issuer operates. With respect to losses for which the Issuer is covered by its policies, it may be difficult and may take time to recover such losses from insurers. In addition, the Issuer may not be able to recover the full loss incurred from the insurer. No assurance can be given that the Issuer’s current insurance coverage would be sufficient to cover all potential losses, regardless of the cause, nor can any assurance be given that an appropriate coverage would always be available at acceptable commercial rates. Furthermore, changes in the cost or availability of insurance or acts of God could expose the Issuer to uninsured losses which may result in the value of the Issuer’s property assets being reduced by the amount of that uninsured loss.

ix. To varying degrees, the Issuer is reliant upon technologies and operating systems (including IT systems) developed by third parties for the running of its business, and is exposed to the risk of failures in such systems.

x. The Issuer may enter into transactions which would expose the Issuer to the credit risk of third parties and their ability to satisfy the terms of such contract. In the event of a bankruptcy or insolvency of such third parties, the Issuer could experience significant losses.

xi. An increase in interest rates on the Issuer’s existing or future borrowings may increase the costs of the Issuer’s borrowings and have an adverse effect on the profitability of the Issuer.

xii. A portion of the Issuer’s costs are fixed and the Issuer’s operating results are vulnerable to short-term changes in its revenues. The Issuer’s fixed operating expenses are not easily reduced to react to changes in its revenue by reducing its operating expenses, which could have a material adverse effect on its business, financial condition and the results of operations. In addition, the Issuer’s operating and other expenses could increase without a corresponding increase in turnover or revenue.

xiii. The Issuer is exposed to currency risk due to changes in the rates of exchange between the currency of IC Çeşme (the Turkish Lira) and its own (Euro). In addition, the Issuer may make other investments in currencies other than the Euro (the base and reporting currency of the Issuer).

xiv. The Issuer is subject to a variety of laws and regulations, including taxation, environmental and health and safety regulations. The Issuer is at risk in relation to changes in the laws and regulations and the timing and effects of changes in the laws and regulations to which it is subject, including changes in the interpretation thereof which cannot be predicted.

xv. The Issuer is exposed to the risk of litigation from its customers, actual and potential partners, suppliers, employees, regulatory authorities, and other stakeholders or interested persons. Adverse publicity from such allegations may materially adversely affect the business of the Issuer and the results of its operations, regardless of whether such allegations are true or whether the Issuer is ultimately held liable.

xvi. The Issuer is exposed to the risks associated with the trends and future outlook of the yacht and superyacht industry as a whole.

xvii. Camper & Nicholsons is the marina consultant and marina manager for the Issuer and a sales agent for long-term berth licences. The Issuer also depends on Camper & Nicholsons’ ability to identify, analyse, invest in projects, operate and dispose of projects and secure finance for those projects that meet the Issuer’s investment criteria. Failure by Camper & Nicholsons to timely identify and undertake projects that meet the Issuer’s investment objectives and to manage investments effectively could have a material adverse effect on the Issuer’s business, financial condition and results of its operations.

xviii. The Issuer holds and may in the future hold investments in its portfolio under the terms of lease agreements, build-operate-transfer (“BOT”) agreements or like concessions. Such leases, BOT Agreements or concessions may contain terms and conditions which, if breached, may expose the Issuer to the cost of damages and/or termination of the concession without compensation.

xix. The activities relating to the operation and management of the Marina, and its ancillary activities, subject the Issuer, and other third-parties with whom the Issuer deals, to a variety of laws and regulations, whether in Malta or in other jurisdictions, relating to the environment, marine conservation, air and water pollution, health and safety, employment, planning, land use and development standards which may be subject to change from time to time and which impose liability including liability for personal injury, environmental damage and other damages. A breach by the Issuer of any of such laws and regulations, to which it is subject, or its failure to adapt in a timely manner to changes thereof, could materially adversely affect the financial condition of the Issuer, the results of its operations, and its ability to meet its obligations under the Bonds.

xx. As at the date of this Prospectus, the Issuer owns the Marina and owns 45% of IC Çeşme, which itself owns the Çeşme Marina. The Bondholders have no assurance as to the degree of diversification, if any, that the Issuer may be able to hold in its investments, whether by asset type or by geographic location. Investments in marinas and marina related real estate are considered to be relatively illiquid.

xxi. The Marina competes with other marinas in Malta as well as other overseas marinas and ancillary service providers, and is susceptible to a variety of competitive factors including location, water depth, berth configurations, landside facilities and storage facilities, pricing, service, quality, availability, variety, availability of utility and other ancillary services, promotional and advertising activity, fluctuations in demand and supply. 

xxii. Valuations of marinas and marina related real estate may be complex as there may be no liquid market or pricing mechanisms. As a result, valuations are inherently subject to uncertainty and subjectivity and there can be no assurance that the estimates resulting from the valuation process will reflect the net realisable value, even where such realisations occur shortly after the date of the valuation. 

xxiii. The Issuer may be subject to risks associated with the development of marinas and marina related real estate. If these risks were to materialise, they could have an adverse and material effect on the Issuer’s financial condition and the results of its operations. In addition, for the timely completion of development projects, the Issuer may place certain reliance on counterparties. Failure of such counterparties to perform their obligations due to the Issuer could, in turn, materially adversely affect the financial condition of the Issuer and its future prospects. 

xxiv. The continuity and profitability of the Marina operations depends in part on the Issuer’s ability to anticipate and react to changes in the cost of its suppliers, and on its dependence on the frequent and timely deliveries by its suppliers.

xxv. The Grand Harbour Marina is owned by the Issuer under a 99-year sub-emphyteusis. In the event that the rights to terminate this sub-emphyteusis are lawfully exercised as a result of a breach of the conditions contained therein, such termination will have a material adverse effect on the financial condition of the Issuer, the results of its operations, and the ability of the Issuer to meet its obligations under the Bonds. 

xxvi. As at the date of this Prospectus, the Issuer owns 45% of IC Çeşme which itself owns and operates the Çeşme Marina, a marina located in Çeşme Turkey. The risks mentioned above as risks associated with investments in marinas naturally apply to the operation of the Çeşme Marina. In addition, since the Çeşme Marina is located in Turkey, IC Çeşme’s business and results of operations are affected by general economic, political and social conditions in Turkey. In recent years the Turkish economy has registered significant growth though it has also experienced severe macro-economic imbalances. Turkey might experience negative changes in the government and political environment and/or significant economic crisis in the future, which could have a material adverse effect on IC Çeşme’s business, financial condition, results of operations and/or prospects. A downturn in the financial condition, results of operations and/or prospects of IC Çeşme may in turn have a material adverse effect on the financial condition of the Issuer, the results of its operations.

Essential information on the key risks specific to the Bonds:

i. Prior to the Bond Issue, there has been no public market nor trading record for the Bonds within or outside Malta. Due to the absence of any prior market for the Bonds, there can be no assurance that the Bond Issue Price will correspond to the price at which the Bonds will trade in the market subsequent to the Bond Issue.

ii. The existence of an orderly and liquid market for the Bonds depends on a number of factors, including but not limited to the presence of willing buyers and sellers of the Issuer’s Bonds at any given time and the general economic conditions in the market in which the Bonds are traded. Such factors are dependent upon the individual decisions of investors and the general economic conditions of the market, over which the Issuer has no control. Accordingly, there can be no assurance that an active secondary market for the Bonds will develop, or, if it develops, that it will continue. Furthermore, there can be no assurance that an investor will be able to sell or otherwise trade in the Bonds at or above the Bond Issue Price or at all. 

iii. Investment in the Bonds involves the risk that subsequent changes in market interest rates may adversely affect the value of the Bonds.

iv. Investors should also be aware that the price of fixed rate Bonds moves adversely to changes in interest rates. When prevailing market interest rates are rising, the price of fixed rate Bonds decline. Conversely, if market interest rates are declining, the price of fixed rate Bonds rises. This is referred to as market risk since it arises only if a Bondholder decides to sell the Bonds before maturity on the secondary market.

v. Any Bondholder whose currency of reference is not the Euro will bear the risk of any fluctuations in exchange rates between the currency of denomination of the Bonds (€) and the Bondholder’s currency of reference.

vi. No prediction can be made about the effect which any future public offerings of the Issuer’s securities, or any takeover or merger activity involving the Issuer, will have on the market price of the Bonds prevailing from time to time. If such changes take place they could have an adverse effect on the market price for the Bonds.

vii. The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without any priority or preference among themselves and with other unsecured debt, if any. The Bonds will, however, rank subordinate to the present and future secured creditors of the Issuer. Furthermore, subject to a negative pledge clause third party security interests may be registered which will rank in priority to the Bonds against the assets of the Issuer for so long as such security interests remain in effect. In essence, this means that for so long as the Issuer may have secured, privileged or other higher-ranking creditors, in the event of insolvency of the Issuer the Bondholders would rank after such creditors but equally between themselves and with other unsecured creditors (if any) of the Issuer. 

viii. In the event that the Issuer wishes to amend any of the Terms and Conditions of the Bonds or any material terms of issuance of the Bonds it shall call a meeting of Bondholders. These provisions permit defined majorities to bind all Bondholders including Bondholders who did not attend and vote at the relevant meeting and Bondholders who voted in a manner contrary to the majority.

ix. The Terms and Conditions of this Bond Issue are based on the requirements of the Listing Rules, the Companies Act and the regulation in effect as at the date of the Prospectus. No assurance can be given as to the impact of any possible judicial decision or change in Maltese law or administrative practice after the date of this Prospectus. The Issuer may incur further borrowings or indebtedness and may create or permit to subsist security interests upon the whole or any part of its present or future undertakings, assets or revenues (including uncalled capital). 

x. The Issuer has not sought, nor does it intend to seek, the credit rating of an independent agency and there has been no assessment by any independent rating agency of the Bonds.

xi. Even after the Bonds are admitted to trading on the MSE, the Issuer is required to remain in compliance with certain requirements relating inter alia to the free transferability, clearance and settlement of the Bonds in order to remain a listed company in good standing. Moreover, the Listing Authority has the authority to suspend trading or listing of the Bonds if, inter alia, it comes to believe that such a suspension is required for the protection of investors or the integrity or reputation of the market. The Listing Authority may discontinue the listing of the Bonds on the MSE. Any such trading suspensions or listing revocations/discontinuations described above could have a material adverse effect on the liquidity and value of the Bonds.

Disclaimer:

Prospective investors are urged to base any investment decision on all the information contained in the Prospectus. The value of investments may increase as well as decrease and past performance is not an indication of future performance. Prospective investors should consult an independent financial adviser for personal advice with respect to the suitability of the Bonds prior to investing in them.

Downloads:

Grand Harbour Marina plc – Prospectus dated 26 June 2017

Rizzo, Farrugia & Co. (Stockbrokers) Ltd is the Sponsor, Manager & Registrar to the Grand Harbour Marina plc bond issue.

This webpage has been prepared based on the Prospectus dated 26 June 2017 issued by Grand Harbour Marina plc and no representations or guarantees are made by Rizzo, Farrugia & Co. (Stockbrokers) Ltd with respect to the accuracy of the data. This webpage is for information purposes only. It is not intended to be and should not be construed as an offer or solicitation to acquire or dispose of any of the securities or issues mentioned herein. Rizzo, Farrugia & Co. (Stockbrokers) Ltd accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this webpage.

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