Mediterranean Investments Holding plc - Details of New Bond Issue

May 31, 2017

On 31 May 2017, Mediterranean Investments Holding plc announced that it received approval for the issuance of €40 million 5.00% unsecured bonds maturing in 2022.

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

Coupon:

5.00%

Amount Offered:

€40 million

Guarantor:

Corinthia Palace Hotel Company Limited (CPHCL), a private limited liability company registered in Malta with company registration number C 257.

The Bonds shall be guaranteed in respect of both the interest due and the principal amount under the said Bonds by the Guarantor, and shall at all times rank pari passu, without any priority or preference among themselves and, save for such exceptions as may be provided by applicable law, shall rank without priority and preference with all other present and future unsecured obligations of the Issuer and the Guarantor. The Bonds will, however, rank subordinate to the present and future secured creditors of the Issuer and the Guarantor. The strength of this undertaking on the part of the Guarantor is directly linked to the financial position and solvency of the Guarantor. Furthermore, subject to the negative pledge clause set out in sub-section 6.8 of the Securities Note, 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.

Prospective investors are urged to refer to the Guarantee contained in Annex A of the Securities Note forming part of the Prospectus for a description of the scope, nature and term of the Guarantee. Reference must also be made to the sections entitled “Risk Factors” contained in the Summary Note, the Registration Document and the Securities Note for a discussion of certain risk factors which should be considered by prospective investors in connection with the Bonds and the Guarantee provided by CPHCL.

Issue Price:

100% (par)

Interest Payment Date:

Annually on 6 July (first interest payment date is 6 July 2018)

Maturity:

The bonds will mature at 100% (par) on 6 July 2022.

Status:

The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer, guaranteed by the Guarantor, and shall at all times rank equally, without any priority or preference among themselves and with other unsecured debt of each of the Issuer and the Guarantor. 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 €39.5 million after issuance costs, will be used by the Issuer for the redemption of the outstanding 7.15% Mediterranean Investments Holding plc 2015-17 bonds which will be redeemed on 6 July 2017. The outstanding bonds are split as follows: €28.52 million denominated in Euro; GBP4.35 million denominated in Pound Sterling and USD7.12 million denominated in US Dollars.

Deadline for ‘Preferred Applicants’:

Friday 16 June 2017 at 09:30 hrs with applications for a minimum of €1,000 and in multiples of €100 thereafter.

‘Preferred Applicants’ are holders of the 7.15% Mediterranean Investments Holding plc 2015-17 bond (Application Form A) and all other Corinthia Group Bondholders (Application Form B) as at the close of trading on 24 May 2017.

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 Mediterranean Investments Holding plc dated 29 May 2017 including the Risk Factors which are found in the Registration Document on pages 7 to 13 and in Section 2 of the Securities Note found on pages 8 and 9. 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 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 investment.

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.

In so far as prospective investors seek advice from Authorised Intermediaries concerning an investment in the Bonds, Authorised Intermediaries are to determine the suitability of prospective investors’ investment in the Bonds in the light of said prospective investors’ own circumstances. The Bonds may not be a suitable investment for all investors. In particular, Authorised Intermediaries should determine whether each prospective investor: (i) has sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the merits and risks of investing in the Bonds and the information contained or incorporated by reference in the Prospectus or any applicable supplement; (ii) has sufficient financial resources and liquidity to bear all the risks of an investment in the Bonds, including where the currency for principal or interest payments is different from the prospective investor’s currency; (iii) understands thoroughly the terms of the Bonds and is familiar with the behaviour of any relevant indices and financial markets; and (iv) is able to evaluate possible scenarios for economic, interest rate and other factors that may affect his/her/its investment and his/her/its ability to bear the applicable risks.

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. Investors are, therefore, urged to consult their own financial or other professional advisers with respect to the suitability of investing in the Bonds.

The Issuer was incorporated in 2005 and, through PCL, has been primarily involved in the development and operation of Palm City Residences. Until such time when the Medina Tower project and the Palm Waterfront project are fully developed and launched on the market, the Issuer will continue to be solely dependent on the business prospects and operating results of PCL. The operations of PCL and its operating results are subject to a number of factors that could adversely affect the Group’s business and financial condition, some of which are beyond the Group’s control:

Whilst the Issuer and PCL are registered in Malta, all of their respective assets, operations, business interests and activities are located or conducted in Libya through a branch of PCL. The Group’s business activities over the coming years are expected to be focused on and aimed at the development of the Medina Tower project in which the Group has a 25% holding and Palm Waterfront, which is to be developed by a 100% owned subsidiary of the Issuer. Accordingly, the Group is susceptible to the political and economic risks that may from time to time influence Libya’s prospects. Negative political or economic factors and trends in or affecting Libya could have a material impact on the business of the Issuer.
Emerging markets present economic and political conditions which differ from those of the more developed markets and could possibly present less social, political and economic stability, which could render investment in such markets more risky than investments in more developed markets. As an emerging market, the Libyan market is undergoing and may continue to undergo substantial political, economic and social reform, and the implications and consequences of reform may not be entirely clear at the outset. The consequences may be profound and, accordingly, prospective investors should take into account the unpredictability associated thereto.

iii. The main pillar of the Group’s business consists of the acquisition, development and running of real estate projects in Libya. Property development projects are subject to a number of specific risks inherent in this field – the risk of cost overruns; the risk of insufficiency of resources to complete; the risk of sale or rental transactions not being effected at the prices and within the timeframe envisaged; higher interest costs; and the erosion of revenue generation. If these risks were to materialise, they would have an adverse impact on the Issuer’s revenue generation, cash flows and financial performance.

All industries, including the property development industry, are subject to legal claims, with and without merit. Defence and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation and dispute resolution process, there can be no assurance that the resolution of any particular legal proceeding or dispute will not have a material adverse effect on the Issuer’s and/or the Guarantor’s future cash flow, results of operations or financial condition.
The Issuer and PCL both have a material amount of debt, and the amount of debt funding of the Issuer is expected to increase as and when the Issuer undertakes the Medina Tower and the Palm Waterfront projects, and other possible future development plans. A substantial portion of the Group’s generated cash flows will be required to make principal and interest payments on the Group’s debt. A substantial portion of the cash flow currently generated from PCL’s operations is utilised to repay its debt obligations pursuant to the terms of the facilities provided. The financial covenants to which such facilities are subject give rise to a reduction in the amount of cash available for distribution to the Issuer which would otherwise be available for funding of the Issuer’s working capital, capital expenditure, development costs and other general corporate costs, or for the distribution of dividends.
The Issuer relies, and will in future be relying heavily, on the contacts and expertise of the Corinthia Group and NREC, its principal shareholders, in connection with providing assistance in the application for and procurement of permits, licenses or other development authorisations from the competent authorities in Libya, in relation to present and future projects. However, no assurance can be given that the Issuer or its subsidiaries will be able to use such contacts and expertise as and when required.

vii. The Issuer is, in part, reliant on the business of CPHCL, which has a long trading history in mixed-use real estate developments that consist principally of hotels, residences, offices and retail areas. The hotel industry globally is characterised by strong and increasing competition. Many of CPHCL’s current and potential competitors’ operating histories, name recognition, customer bases and financial and other resources are a competitive factor for the Guarantor wherever it may have business. Severe competition in certain countries and changes in economic and market conditions could adversely affect CPHCL’s business and operating results. The Guarantor’s prospects should be considered in the light of the risks and the difficulties generally encountered by companies operating in a mixture of mature and stabilised markets coupled with new and rapidly developing markets. CPHCL’s operations and its results are subject to a number of factors that could adversely affect the Corinthia Group’s business, many of which are common to the hotel and real estate industry and beyond the Corinthia Group’s control.

viii. The Group’s activities potentially expose it to a variety of financial risks, including market risk (principally interest rate risk and fair value risk), credit risk and risks associated with the unpredictability of financial markets, all of which could have adverse effects on the Group’s financial performance.

The Issuer’s overseas operations are exposed, in the case of transactions not denominated in Euro, to foreign currency risk on transactions, receivables and borrowings that are denominated in a currency other than the Euro. As a result, exchange losses may arise on the realisation of amounts receivable and the settlement of amounts payable in foreign currencies.

Essential information on the key risks specific to the Bonds:

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. Such factors are dependent upon the individual decisions of investors and the general economic conditions of the market in which the Bonds are traded, over which the Issuer has no control. Many other factors over which the Issuer has no control may affect the trading market for, and trading value of, the Bonds, including the time remaining to the maturity of the Bonds, the outstanding amount of the Bonds and the level, direction and volatility of market interest rates, generally. 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.
Investment in the Bonds involves the risk that subsequent changes in market interest rates may adversely affect the value of the Bonds.

iii. A Bondholder 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, if different.

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.
The Bonds shall constitute the general, direct, unconditional and unsecured obligations of the Issuer and shall be guaranteed in respect of both the interest due and the principal amount under said Bonds by the Guarantor, and shall at all times rank pari passu, without any priority or preference among themselves and, save for such exceptions as may be provided by applicable law, shall rank without priority and preference with all other present and future unsecured obligations of the Issuer and the Guarantor. The Bonds will, however, rank subordinate to the present and future secured creditors of the Issuer and the Guarantor. In view of the fact that the Bonds are being guaranteed by the Guarantor, Bondholders are entitled to request the Guarantor to pay both the interest due and the principal amount under said Bonds if the Issuer fails to meet any amount, when due. The strength of this undertaking on the part of the Guarantor is directly linked to the financial position and solvency of the Guarantor.
In the event that the Issuer wishes to amend any of the Terms and Conditions of the Bonds it shall call a meeting of Bondholders. The provisions relating to meetings of Bondholders permit defined majorities to bind all Bondholders, including Bondholders who do not attend and vote at the relevant meeting and Bondholders who vote in a manner contrary to the majority.

vii. The Bonds and the Terms and Conditions of the 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 law or administrative practice after the date of the Prospectus.

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:

Mediterranean Investments Holding plc – Prospectus dated 29 May 2017

Rizzo, Farrugia & Co. (Stockbrokers) Ltd acted as Sponsor to the Mediterranean Investments Holding plc bond issue.

This webpage has been prepared based on the Prospectus dated 29 May 2017 issued by Mediterranean Investments Holding 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.