Virtu Finance plc - Details of New Bond Issue

Thursday, November 2nd, 2017

On 2 November 2017, Virtu Finance plc published a Prospectus for the issuance of €25 million 3.75% unsecured bonds maturing in 2027.

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

Coupon:

3.75%

Amount Offered:

€25 million

Issue Price:

100% (par)

Interest Payment Date:

Annually on 30 November (first interest payment date is 30 November 2018)

Maturity:

The bonds will mature at 100% (par) on 30 November 2027.

Status:

The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer, guaranteed by Virtu Maritime Limited (the “Guarantor”), and shall at all times rank pari passu, without any priority or preference among themselves and with other unsecured debt of each of the Issuer and the Guarantor.

Furthermore, the bonds are governed by a negative pledge clause which essentially: (i) restricts the Guarantor from declaring and/or paying any dividends in the event that such dividends would result in a gearing ratio (calculated as net debt divided by net debt plus equity) of VML exceeding 75%; and (ii) restricts VML in maintaining a cap on its gearing ratio of 75%.

Prospective investors are urged to refer to the “Guarantee” contained in Annex III of the Securities Note forming part of the Prospectus dated 30 October 2017 for a description of the scope, nature and term of the Guarantee being provided by the Guarantor.

Use of Proceeds:

The net proceeds from the Bond issue, estimated at approximately €24.55 million after issuance costs, will be used by the Issuer for part-financing the €75 million acquisition of a new high-speed vessel which, upon commencement of operation in mid-2019, will complement the JDLV along the Malta-Sicily route. The remaining funds required for the acquisition of the new vessel will be financed through bank borrowings amounting to €40 million, €7 million in shareholders’ loans together with a further €3.45 million from own funds.

Deadline for Submission of Application Forms:

Wednesday 23 November 2017 at 9.00 hrs

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

Download:

Virtu Finance plc – Prospectus dated 30 October 2017

Listing:

Official List of the Malta Stock Exchange

Risk Factors:

Prospective investors are urged to read the Prospectus issued by Virtu Finance plc dated 30 October 2017 including the risk factors which are found in Section 2 – “Risk Factors” of the Registration Document on pages 24 to 32 and in Section 2 – “Risk Factors” of the Securities Note found on pages 67 to 68. The below is a summary of the risk factors as contained in the Summary Note which, however, DOES NOT replace the need for prospective investors to read all the risk factors listed and explained 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 dated 30 October 2017, 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. They appear in a number of places throughout the Prospectus and include statements regarding the intentions, beliefs or current expectations of the Issuer and/or its Directors. 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 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. As such, there may also be other risks which are not mentioned in this summary.

1.  Essential information on the key risks specific to the Issuer

(i)      Issuer’s Dependence on the Virtu Maritime Group and its Business

The Issuer is a finance company, with its main purpose presently being that of financing or re-financing the funding requirements of the business of the Virtu Maritime Group, specifically at the date of the Prospectus, the acquisition of a new Vessel. In this respect, in so far as the Bonds are concerned, the Issuer is mainly dependant on the business prospects of the Virtu Maritime Group, and consequently, the operating results of the Virtu Maritime Group have a direct effect on the Issuer’s financial position and performance, and as such the risks intrinsic in the business and operations of the Virtu Maritime Group have a direct effect on the ability of the Issuer to meet its obligations under the Bonds. As a majority of its assets consist of loans issued to Group Companies, the Issuer is largely dependent on receipt of interest and loan repayments from the Group Companies. The interest payments and loan repayments to be effected by the operating companies of the Virtu Maritime Group are subject to certain risks. More specifically, the ability of Group Companies to effect payments to the Issuer will depend on their respective cash flows and earnings which may be affected by factors beyond the Issuer’s control. The occurrence of any such factors could in turn negatively affect the Issuer’s ability to meet its obligations under the Bonds.

(ii)      Concentration of Shareholding

The Virtu Maritime Group, through the Guarantor, and its parent Virtu Holdings, is ultimately owned exclusively by Francis A. Portelli and John M. Portelli, in equal proportions respectively. The Issuer is owned as to 99.99% by Virtu Holdings, with the remaining one ordinary share held by The Virtu Group Limited, which is also owned exclusively by Francis A. Portelli and John M. Portelli in equal proportions respectively. Accordingly, the owners of the Virtu Maritime Group together exercise effective control over the Issuer. These individuals are considered to be important to the success of the Issuer and the unexpected loss of any of these persons or dilution of their control or influence over the Issuer and its business could have an adverse effect on the Issuer.

2.  Risks relating to the Virtu Maritime Group: the Virtu Maritime Group and its Business

(i)      Exposure to General Economic Conditions

The Virtu Maritime Group is highly susceptible to economic trends that may be felt in Malta, Italy 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 and social factors. The Virtu Maritime Group’s business activities are concentrated in and aimed at the Maltese and Sicilian market. The Virtu Maritime Group is therefore susceptible to adverse economic developments and trends overseas, particularly in the Italian market. Any future expansion of the Virtu Maritime Group’s operations into other markets would further increase its susceptibility to adverse economic developments and trends affecting such other markets. Accordingly, negative economic factors and trends, whether in Malta or overseas, could have a negative impact on the business of the Virtu Maritime Group, its cash flows and the results of its operations. In particular, weak economic conditions or tightening of the credit markets may affect the solvency of its suppliers or customers, which in turn may impact the Virtu Maritime Group’s ability to fulfil its obligations.

(ii)      Key Senior Personnel Material to the Group’s Growth

The Virtu Maritime Group believes that its growth is partially attributable to the efforts and abilities of the executive management team and other key personnel involved in the running of the Virtu Maritime Group’s operations. If any one or more of such key personnel were unable or unwilling to continue in their present position, the Virtu Maritime Group might not be able to replace them within the short term, which could have a material adverse effect on the Virtu Maritime Group’s business, financial condition and results of operations. Although no single person is solely instrumental in fulfilling the Virtu Maritime Group’s business objectives, there is no guarantee that the Virtu Maritime Group’s business objectives will be achieved to the degree expected following the loss of key personnel.

(iii)     Growth Strategy

A significant element of the Virtu Maritime Group’s strategy is represented by the new Vessel – a new high-speed passenger/cargo roll-on/roll-off catamaran ferry currently on order, scheduled to be delivered to Virtu Wavepiercer during the last quarter of 2018/first quarter of 2019. The delivery of a new-build could be delayed because of factors such as: (i) shortages of equipment, materials or skilled labour; (ii) delays in the receipt of necessary construction materials or equipment; (iii) failure of equipment to meet quality and/or performance standards; (iv) political or economic disturbances; (v) financial or operating difficulties experienced by equipment vendors or the shipyard; (vi) required changes to the original ship specifications; (vii) inability to obtain required permits or approvals; (viii) disputes with the shipyard; (ix) work stoppages and other labour disputes; and (x) adverse weather conditions or any other events of force majeure. Significant delays in the delivery of the new Vessel, which is expected to generate a substantial portion of the Virtu Maritime Group’s projected revenue, could adversely affect the results of the Virtu Maritime Group. In addition, the delivery of the new Vessel with substantial defects or unexpected operational problems could have similar consequences.

(iv)     Financial Strategy

The Virtu Maritime Group may not be able to secure sufficient financing for its future operations. No assurance can be given that sufficient financing will be available on commercially reasonable terms or within timeframes required by the Virtu Maritime Group. Failure to obtain, or delays in obtaining, the capital required to complete future developments and investments on commercially reasonable terms, including increases in borrowing costs or decreases in loan availability, may limit the Virtu Maritime Group’s growth and materially and adversely affect its business, financial condition, results of operations and prospects. The Virtu Maritime Group may be exposed to a variety of financial risks associated with the unpredictability inherent in financial markets, including market risk, credit risk, foreign exchange rate risk, and interest rate risk.

(v)      Lease and Renewal

The Group Companies are party to a number of rental contracts. Continued use and enjoyment of the properties in question is therefore susceptible to a number of risks typically associated with leases, including: (i) exercise of early termination rights by the lessor; (ii) default of obligations under the lease agreement(s); (iii) changes in the general economic conditions of the property market; (iv) the ability of the Group Company to maintain its commercial relationship with the existing lessor and/or enter into new commercial relationships with a new lessor, on existing or more favourable terms; and (v) changes in laws, regulations, taxes or government policies.

(vi)     The Virtu Maritime Group’s Insurance Policies

The Virtu Maritime Group maintains insurance cover for its business at the levels required by maritime good practice and international norms. Recovering losses from insurers may be difficult and time-consuming, and the Virtu Maritime Group may be unable to recover the full loss incurred. No assurance can be given that the Virtu Maritime’s Group’s current insurance coverage would be sufficient to cover all potential losses, regardless of the cause, nor that an appropriate coverage would always be available at acceptable commercial rates.

(vii)    Reliance on Non-Proprietary Software Systems and Third-Party IT Providers

To varying degrees, the Group is reliant on technologies and operating systems (including IT systems) developed by third parties for the running of its business and it is exposed to the risk of failures in such systems. There can be no assurance that maintenance and service level agreements and disaster recovery plans intended to ensure continuity and stability of these systems will prove effective in ensuring that the service or systems will not be disrupted. Disruption to those technologies or systems and/or lack of resilience in operational availability could adversely affect the efficiency of the Group’s business, financial condition and/or operating performance.

(viii)   Level of Interest Rates

Interest rate risk refers to the potential changes in the value of financial assets and liabilities in response to changes in the level of interest rates and their impact on cash flows. The Virtu Maritime Group may be exposed to the risks associated with the effects of fluctuations in the prevailing levels of the market interest rates on its financing position and cash flows.

(ix)     The Virtu Maritime Group’s Indebtedness

The Virtu Maritime Group has a material amount of debt and may incur additional debt in connection with its future growth. Borrowings under bank credit facilities are or may be at variable interest rates, which would render the Virtu Maritime Group vulnerable to increases in interest rates. The financing agreements regulating the Virtu Maritime Group’s bank debt impose and are likely to impose significant operating restrictions and financial covenants on the Virtu Maritime Group which could limit the Virtu Maritime Group’s ability to obtain future financing, fund capital expenditure or withstand a future downturn in business or economic conditions generally. In the event that the Virtu Maritime Group’s generated cash flows were to be required to make principal and interest payments on any existing or prospective debt, this could give rise to a reduction in the amount of cash available for distribution by the Virtu Maritime Group, which would otherwise be available for funding of the Virtu Maritime Group’s working capital, capital expenditure, development costs, and other general corporate costs, or for the distribution of dividends. The Guarantor may also be required to provide guarantees for debts contracted by its Subsidiaries. Defaults under financing agreements could lead to the enforcement of security over property of the Guarantor, where applicable, and/or cross-defaults under other financing agreements.

(x)      Operating Expenses

A portion of the Virtu Maritime Group’s costs are fixed and its operating results are vulnerable to short-term changes in its revenues, and such fixed operating expenses are not easily reduced to react to changes in its revenue by reducing its operating expenses. The Virtu Maritime Group’s operating and other expenses could increase without a corresponding increase in turnover or revenue. The factors which could materially increase the Virtu Maritime Group’s operating and other expenses include: increases in the rate of inflation, payroll expenses, property taxes and statutory charges, and changes in law and policy. Such increases could have a material adverse effect on the Issuer’s financial position and its ability to fulfil its obligations under the Bonds.

(xi)     Exchange Rate Risk

The Virtu Maritime Group can be impacted by transaction risk, which is the risk that the currency of costs and liabilities fluctuates in relation to the Euro, being its reporting currency, which fluctuation may adversely affect its operating performance. Unfavourable exchange rates may lead to higher costs or lower sales than expected at the time of signing the contract and may reduce margins. Such risks are beyond the control of the Issuer.

(xii)    Corporate Social Responsibility

Given consumers’ growing concerns about responsible trade and the nature and reality of commitments, corporate social responsibility policies and actions, or the limitations or absence thereof, may impact the Virtu Maritime Group’s reputation and standing.

(xiii)   Risk of Complaints and Litigation

Since the Virtu Maritime Group operates in an industry which involves the continuous provision of goods and services to customers and consumers and such operation necessarily requires continuous interaction with suppliers, employees, and regulatory authorities, the Virtu Maritime Group is exposed to the risk of litigation from customers, partners, suppliers, employees, and regulatory authorities. Adverse publicity surrounding such claims may materially affect sales revenue generated by the Virtu Maritime Group regardless of whether such claims are upheld and any allegations relating thereto are true or otherwise. Additionally, the Virtu Maritime Group may be involved in arbitration proceedings as a result of potential systemic deficiencies in the vessels owned and operated by the Virtu Maritime Group. Such circumstances may not be covered by the contractual warranties and representations given by the vessels’ builders, and may therefore result in arbitration or court proceedings. All dispute resolution and litigation is expensive, time consuming and may divert management’s attention away from the operation of the business. In addition, the Virtu Maritime Group cannot be certain that its insurance coverage will be sufficient to cover one or more substantial claims. Furthermore, it is possible that if complaints, claims or legal proceedings were to be brought against a direct competitor of the Group, the latter could also be affected due to the adverse publicity brought against and concerns raised in respect of the industry in general. No assurance can be given that disputes which could have a significant effect on the Virtu Maritime Group’s financial position or operational performance will not arise. Exposure to litigation or fines imposed by regulatory authorities may affect the Virtu Maritime Group’s reputation even though the monetary consequences may be insignificant.

(xiv)   Changes to Laws and Regulations

The Virtu Maritime Group is subject to a variety of laws and regulations both in and out of Malta, including maritime and shipping, taxation, environmental and health and safety regulations. The Virtu Maritime Group is at risk in relation to changes in any applicable laws and regulations, including changes to the interpretation thereof, which cannot be predicted. No assurance can be given as to the impact of any possible judicial decision, change in law, regulation or administrative practice, after the date of this Prospectus, on the business and operations of the Virtu Maritime Group. In addition, the Virtu Maritime Group’s activities are subject to licensing and regulation by a number of local and foreign governmental authorities. Difficulties in obtaining or maintaining the required licenses or approvals, or the loss thereof, could adversely affect the Virtu Maritime Group’s business and results of its operations.

3.  Risks relating to the Virtu Maritime Group: the Ferry and Shipping Services industry

The Virtu Maritime Group’s ferry service operations are subject to external factors, many of which are common to the ferry operating industry and beyond the Virtu Maritime Group’s control, including: (i) changes in travel patterns and evolving consumer trends and preferences and the ability of the Virtu Maritime Group to swiftly anticipate, identify and capitalise thereon; (ii) susceptibility to local and global competition influenced by a variety of factors including price differences, packages, quality, availability, reliability and ancillary services such as accommodation and logistics; (iii) increase in the price of fuel or port facilities charges, or the imposition of new taxes or charges on sea or even air travel; (iv) changes in laws and regulations on employment, health and safety, environmental and marine protection concerns and the related costs of compliance; (v) the impact of increased threats of terrorism, impediments to means of transportation, extreme weather conditions, natural disasters, travel-related accidents, and outbreaks of health concerns; (vi) increases in operating costs; and (vii) the arrest or detainment of the vessels owned by the Virtu Maritime Group by maritime claimants or other authorities, or the requisitioning of any vessel during a period of war or emergency. In particular, a relative decline in the competitive strength of the Virtu Maritime Group could adversely affect its results of the ferry service operations and the Virtu Maritime Group may be compelled, by the strength of its competitors, to reduce its own prices. The ability of the Virtu Maritime Group to maintain or increase its profitability will be dependent on its ability to offset such decreases in prices and margins of its ferry services. Furthermore, the Virtu Maritime Group is not limited to competition from other ferry service operators but also from substitute means of transportation, including air travel operators. These factors may adversely impact the Virtu Maritime Group’s tariffs rates and occupancy levels on its ferry services, or reduce its revenue, which could have a material adverse effect on the Virtu Maritime Group’s financial condition and results of operations.

(i)      Downtime of Vessels

With respect to the Malta – Sicily operations of the Virtu Maritime Group, the Virtu Maritime Group currently operates one high speed craft, which number will increase to two vessels upon the delivery of the new Vessel. The charter operation relative to the Maria Dolores described in the Prospectus is entirely dependent on that particular vessel. If any vessel of the Virtu Maritime Group is unable to generate revenues for any significant period of time, whether for early termination of charter agreements or any other cause, whether anticipated or unanticipated, the business of the Virtu Maritime Group, its financial condition and the results of its operations could be materially adversely affected. The Virtu Maritime Group may evaluate its opportunities to acquire vessels, and/or to dispose or retire existing ones, with or without replacement. The Virtu Maritime Group’s ability to acquire new vessels and/or replace old vessels on favourable terms and in a timely manner could significantly impact the business of the Virtu Maritime Group, its financial condition and the results of its operations. Similarly, the risk of insufficient and unprofitable occupancy levels for its new vessels may materialise, and a decline in occupancy levels on its older vessels, could have a material adverse effect on the Virtu Maritime Group’s financial position and performance.

(ii)      Continuity of Terminal and Port Facilities

The continuity of the ferry services of the Virtu Maritime Group depends in part on the continuity of the operations of the terminal and port facilities provided by the various ports of destination servicing the Virtu Maritime Group’s vessels. Any disruptions in the terminal and port facilities, caused by any cause whatsoever, could have a material adverse effect on the business of the Virtu Maritime Group, its financial condition and the results of its operations.

(iii)     Fluctuations in the Value of Vessels

The market value of the Virtu Maritime Group’s vessels, current or future, is subject to market fluctuations and is dependent on a number of factors including general economic and market conditions, the supply of similar vessels, government regulation and policy, substitute means of transportation and technological advancements. Any impairment in the market value of its vessels could have a material adverse effect on the business of the Virtu Maritime Group and its financial position.

(iv)     Fluctuations in the Cost of Fuel and Fuel Hedging Agreements

Bunker fuel constitutes one of the major operating costs of the Virtu Maritime Group’s fleet of vessels and an increase in the price of bunker fuel could have a materially adverse effect on the business of the Virtu Maritime Group, its financial condition and the results of its operations.

(v)      Regulatory Risk

The Virtu Maritime Group provides ferry operations and ship management services in different jurisdictions and is subject to extensive and various international conventions, legislation, regulation and standards including, but not limited to, rules concerning ship safety and design requirements, equipment and operations of ships, discharge of fuel or hazardous substances, marine pollution and spills, recycling of ships, emission control, ballast water handling and treatment, and other environmental protection requirements. The ability of the Virtu Maritime Group to comply with these requirements, and to adapt in a timely manner to changes thereto, including the ability to make modifications to its vessels as required, could impact the reputation of the Virtu Maritime Group and could have a materially adverse impact on the business of the Virtu Maritime Group, its financial condition and the results of its operations. In addition, regulatory requirements and changes thereto may: impact the resale value or useful lives of the Virtu Maritime Group’s vessels; require a reduction or alteration to cargo type and capacity; or necessitate vessel modifications or operational changes, including denial of access to certain jurisdictional waters or ports. Delays in obtaining any governmental or other authoritative approval, or rejection thereof, could materially and adversely affect the business of the Virtu Maritime Group.

(vi)     Safety and Environmental Damage Risk

The ferry service operations of the Virtu Maritime Group carry inherent risks, including the risk of marine disasters, collisions, mechanical failure, human error, piracy, political or industrial disruptions, and explosions and fires on its vessels. The occurrence of any such events could result in: liability for personal injury or death; damage to or loss of property or cargo; delays; loss of revenue; marine clean-up costs; governmental fines or penalties; litigation; higher insurance premiums and damage to reputation and customer relationships, the effects of which may adversely impact the business of the Virtu Maritime Group, its financial condition and the results of its operations. The Virtu Maritime Group carries blue card war insurance and protection and indemnity, hull and machinery and freight, demurrage and defence insurance covering its owned ships consistent with industry standards, however it can give no assurance that it is adequately insured against all risks that may materialise or that its insurers will pay a particular claim. The Virtu Maritime Group also may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. Any uninsured or underinsured loss could harm the Virtu Maritime Group’s business, financial condition, results of operations and cash flows. Furthermore, even if its insurance coverage is adequate to cover its losses, the Virtu Maritime Group may not be able to obtain a timely replacement vessel in the event of a loss of a vessel.

(vii)    Natural Disasters

The Virtu Maritime Group’s ferry service and shipping operations are susceptible to adverse weather conditions and the Virtu Maritime Group’s fleet is at risk of being damaged, abandoned or lost as a result of such adverse weather conditions. Adverse weather conditions are, by their nature, not within the control of the Virtu Maritime Group and, if not predicted and appropriately catered for (such as cancelation of voyages in cases of adverse weather conditions), could have a material adverse effect on the business of the Virtu Maritime Group, its financial condition and the results of its operations.

(viii)   Repairs and Maintenance of the Virtu Maritime Group’s Vessels

Repairs and maintenance of the vessels of the Virtu Maritime Group, and any other unexpected issues which may arise in this regard, may require significant capital expenditure and result in a loss of revenue while its vessels are in downtime. This could have a material adverse effect on the business of the Virtu Maritime Group, its financial condition and the results of its operations, which effects may be exacerbated where more than one vessel of the Virtu Maritime Group is experiencing downtime at the same time.

(ix)     Charters

The Virtu Maritime Group’s charter operations depend on its ability to continue existing relationships with charterers and establish new relationships with other charterers, at attractive rates, in respect of which the Virtu Maritime Group will face substantial competition from its competitors and may be subject to factors beyond the control of the Virtu Maritime Group. Such competitors may have greater name recognition, larger customer bases and greater financial and other resources.

(x)      Reliance and Reliability of Suppliers

The Virtu Maritime Group is reliant upon its suppliers for the availability of and timely supply of consumables, spare parts and operational equipment which is not held in stock from time to time, in order to maintain the operations of its fleet of vessels. Delays in delivery or the unavailability of supplies could have a material adverse effect on the operations of the Virtu Maritime Group and results of its operations.

(xi)     Privileged Maritime Claims and Possessory Liens

Under the provisions of the Merchant Shipping Act (Cap. 234 of the laws of Malta), certain debts specified therein are secured by a special privilege upon the relevant vessel, including: wages and other sums due to the master, officers and other members of the vessel in respect of their employment on the vessel; tonnage dues; moneys due to creditors for labour, work and repairs; and moneys due to creditors for provisions, outfit and apparel. The potential risk associated with the privileged debts attaching to the vessels of the Virtu Maritime Group arises out of the fact that the obligations under the Bonds are subordinated to these privileged debts. Consequently, in the event that there are insufficient funds to cover all the claims of the creditors of the Virtu Maritime Group, if any and whether secured or otherwise, the Bondholders’ claims would be subordinated to these privileged debts and the ability of the Issuer to fulfil its obligations under the Bonds may be materially adversely affected.

In addition, any ship repairer, shipbuilder or other creditor into whose care and authority a vessel has been placed for the execution of works or other purposes shall have a possessory lien over the vessel. This possessory lien entitles such creditor to retain possession over the vessel on which he has worked or carried out activity until such creditor has been paid the debts due to him for such building, repairs or activity. The risk associated with the exercise of this possessory lien includes the risk of suspension of operations, loss of revenue and profits, circumstances constituting an event of default under any agreement, risks which could materially adversely affect the business of the Virtu Maritime Group, its financial condition and the results of its operations.

(xii)    Exercise of Mortgagee’s Rights

Under the provisions of the Merchant Shipping Act, in the event of default of any term or condition of a registered mortgage, or cross-default referred to therein, the mortgagee has the option, upon giving notice in writing to the mortgagor, to exercise the following rights: (i) to take possession of the vessel, or any share therein, in respect of which he is the mortgagee or (ii) to sell the ship, or any share therein, with respect to which he is registered as mortgagee (provided that where more than one person is registered as a mortgagee of the same vessel, this right of sale may only be exercised with the concurrency of every prior mortgagee or under the order of the competent court).

(xiii)   Requisition or Forfeiture of Vessels

Governments could requisition for title or hire, or seize, any number of the Virtu Maritime Group’s vessels during a period of war or emergency, which requisition would have a negative impact on its business, results of operations, cash flow and financial condition. In addition, the Merchant Shipping Act makes provision for a number of instances in which a vessel, or any share therein, could be forfeited, in consequence of which such vessel will be seized and detained and brought for adjudication before the court of competent jurisdiction, which instances include: the improper use of a certificate of registration by the master or owner of a vessel; the undue assumption of Maltese character in relation to a foreign vessel; and the concealment of Maltese character or the assumption of foreign character in relation to a vessel. Where such forfeiture is ordered by the court of competent jurisdiction, such forfeiture will be made in favour of the Government of Malta and could be subject to further orders and conditions as the court deems just to hand down. In the event that any of the vessels of the Virtu Maritime Group is forfeited, the business of the Virtu Maritime Group, its financial conditions and the results of its operations may be materially adversely affected thereby.

(xiv)   Ageing Vessels

In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Insurance rates may increase with the age of a vessel, making older vessels more costly to operate and therefore less attractive to operators and charterers. Government regulations and safety and/or other equipment standards related to the age of vessels may also require expenditures on alterations or new equipment for the Virtu Maritime Group’s vessels and may restrict the type of activities in which the Virtu Maritime Group’s vessels may engage. Each of these factors may negatively impact on the Virtu Maritime Group’s future results of operations.

(xv)    Class Restrictions

The vessels operated by the Virtu Maritime Group are subject to a programme of periodic surveys as established by the International Association of Classification Societies (IACS) and certified for international voyages by an international Classification Society, DNVGL. There remains the possibility that class restrictions may be imposed upon the vessels by DNVGL should any material or significant faults in the vessels be identified. The occurrence of such an event could result in a loss of revenue for the Virtu Maritime Group throughout the risk period as well as during the vessel’s downtime, particularly in the case of significant deficiencies.

(xvi)   Risks Associated with the Food and Beverage Industry

The Virtu Maritime Group’s hospitality and catering operations on board its vessels and within its port facilities are subject to a number of risk factors that may affect the food and beverage industry in general, including the risk of claims by customers in connection with the consumption of contaminated or expired goods. Furthermore, various authorities have the power to conduct inspections of, and possibly to close down, any hospitality or catering outlet operated by the Virtu Maritime Group which fails to comply with applicable regulations and standards.

4.  Key information on the key risks specific to the Bonds

(i)       There can be no assurance that an active secondary market for the Bonds will develop, or, if it develops, that it will continue. Nor can there be any 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.

(ii)      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.

(iv)     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.

(v)      The Issuer may incur further borrowing or indebtedness and may create or permit to subsist other security interests upon the whole or any part of its present or future undertakings, assets or revenues (including uncalled capital).

(vi)     The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer, guaranteed by the Guarantor, and shall at all times rank pari passu, without any priority or preference among themselves and with other unsecured obligations of each 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. Furthermore, subject to the negative pledge clause (found in section 5.7 – “Negative Pledge” 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 or the Guarantor and its Subsidiaries as the case may be, for so long as such security interests remain in effect. In essence, this means that for so long as the Issuer or the Guarantor and its Subsidiaries as the case may be, may have secured, privileged or other higher-ranking creditors, in the event of insolvency of the Issuer (and recourse to the Guarantor in terms of the Guarantee), the Bondholders would rank after such creditors but equally between themselves and with other unsecured creditors (if any) of the Issuer (and/or Guarantor, as applicable).

(vii)    Repayment of interest and capital on the Bonds is being guaranteed by the Guarantor, and therefore Bondholders are entitled to request the Guarantor to pay the full amounts due under the Bonds if the Issuer fails to meet any amount, when due. The strength of this undertaking on the part of the Guarantor and, therefore, the level of recoverability by the Bondholders from the Guarantor of any amounts due under any of the Bonds, is dependent upon and directly linked to, the financial position and solvency of the Guarantor, and in the case of insolvency of the Guarantor, such level of recoverability is further dependent upon the existence or otherwise of any prior ranking claims over the assets of the Guarantor.

(viii)    In the event that the Issuer wishes to amend any of the Terms and Conditions of Issue 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. Furthermore, the Guarantor has the power to veto any changes to the Terms and Conditions of the Bonds which are issued with the benefit of its Guarantee. Were the Guarantor to exercise such right of veto, any proposed amendments to the Terms and Conditions of the Bonds would not be put into effect.

(ix)     The Terms and Conditions of the Bond Issue are based on the requirements of the Listing Rules of the Listing Authority, the Act and the Prospectus 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 the Prospectus.

(x)      Even after the Bonds are admitted to trading on the MSE, the Issuer is required to remain in compliance with certain requirements relating to, inter alia, 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 power 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.

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

(xii)    An investment in the Bonds may not be suitable for all recipients of the Prospectus, and Authorised Financial Intermediaries are to determine the suitability or otherwise of prospective investors’ investment in the Bonds before making an investment decision. In particular, Authorised Financial Intermediaries should determine whether each prospective investor:

(a)      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;

(b)      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 reference currency;

(c)      understands thoroughly the terms of the Bonds and be familiar with the behaviour of any relevant indices and financial markets; and

(d)      is able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

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.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd is the Sponsor to the Virtu Finance plc bond issue.

This webpage has been prepared based on the Prospectus dated 30 October 2017 issued by Virtu Finance 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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