6.0% AX Investments plc 06.03.2024

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AX Investments plc - Prospectus dated 3 February 2014

The Issuer & AX Group

AX Investments plc was set up in 2001 to act as the finance and investment arm of the AX Group. In fact, the Issuer raises funds to finance specific projects being undertaken by the other companies forming the AX Group whilst also generating rental income from the leasing of Palazzo Capua which is managed in conjunction with the Victoria Hotel. AX Investments also owns a 19.91% stake in Suncrest Hotels plc. As a result, AX Investments is dependent on the operations, performance and cash flow streams of the AX Group companies which are subsidiaries of the parent company, AX Holdings Limited.

The AX Group, whose origins date back to 1977, is a property intensive Group with various investments in real estate. Nowadays, the Group is split into five divisions as described below:

i. Hospitality & Entertainment

The Group owns and manages four hotels. This is the largest business unit contributing over 80% of both Group revenues and gross operating profit.

The four hotels are:

a. Palace Hotel – a 149-room, five-star boutique hotel in Sliema with a strong appeal to business travellers ranking as the largest contributor within the hospitality division of the Group;

b. Victoria Hotel – a 137-room, four-star superior hotel in Sliema targeting the business market given its range of conference and meeting facilities together with the adjoining 200-year old Palazzo Capua which is owned directly by AX Investments plc;

Due to the close proximity of the Palace and Victoria hotels in Sliema, these two properties share certain administrative and operating expenses leading to cost savings and a positive impact on their respective gross operating profit.

c. Seashells Resort at Suncrest – a 452-room, four-star hotel in Qawra which is operated as ‘an all-inclusive’ resort;

d. Sunny Coast Resort & Spa – a 91-room, four-star aparthotel situated in Qawra. This hotel was initially operated on a timeshare model with 64% of the apartments still on such contracts which will expire over the coming eight years. In this respect, management is analysing various options to fully utilise the property once the timeshare contracts are phased out.

Additionally, the AX Group owns a 24.6% shareholding in Valletta Cruise Port plc which is the company that operates the cruise and ferry terminal at the Valletta Waterfront and also leases the buildings on the land side of the quays to third parties.

ii. Construction, building materials & management services
The main operating company under this division is AX Construction Limited which undertakes most forms of civil engineering works, turnkey assignments, project management and restoration works. This subsidiary has the experience in carrying out large building and finishing projects, infrastructural works, marine-related projects and restoration projects. AX Construction Limited also undertakes construction and turnkey projects for other AX Group companies.

iii. Property Development
This division is primarily involved in the acquisition of investment properties and identifying the best uses for these properties. The properties are either held for the long-term or developed and sold in the normal course of business. Currently, the AX Group holds a number of properties for eventual development including: (i) 6,000 square metres of land to be developed into an office centre as part of large area identified by the Government for a Business Park; (ii) the ex-Verdala Hotel site earmarked for residential units; (iii) 4,000 square metres of land in Mosta within a residential scheme; and (iv) 1,500 square metres of land also in Mosta within a commercial scheme. The AX Group is awaiting permits with respect to all these properties.

iv. Finance and Investment
The Issuer, AX Investments plc, falls under this division which secures funding for the Group’s projects.

v. Healthcare
The AX Group is entering the healthcare sector through the development of the Hilltop Gardens Care Home & Residences. This €22 million development, set over a land measuring almost 17,000 square metres, will comprise:

a. Hilltop Gardens Care Home – a 90-bed nursing home for persons requiring long-term medical care. Residents at the nursing home will be charged a daily room rate apart from other charges for additional services required;

b. Hilltop Gardens Residences – a complex of 143 self-catering residential units (one or two bedroom) allowing its residents to live independently within a secure community offering a wide range of services.

Works on site have already begun. The care home is expected to be completed during the first half of 2015 whilst construction works on the residences should be finalised by the end of 2015. Both properties are expected to commence operations during the financial year ending 31 October 2016.

Use of Proceeds

The net proceeds from the bond issue, estimated at €39.3 million after issuance costs, were principally used by the Issuer as follows:

i) to finance the redemption of the outstanding €11.6 million 6.7% bonds;

ii) to on-lend €21 million to Simblija Developments Ltd (a wholly-owned subsidiary of AX Holdings Ltd) for the purpose of constructing the Hilltop Gardens Care Home & Residences (the balance of €1 million required for the cost of construction will be funded by own funds of Simblija Developments Limited);

iii) to finance the Group’s general corporate requirements including the early repayment of certain outstanding loans.

Status

The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer. The Bonds will also be guaranteed by AX Holdings Ltd. As such, the Bonds shall at all times rank without any priority or preference among themselves and with other unsecured debt of each of the Issuer and Guarantor.

The AX Group has other debt (comprising bank borrowings and bank overdrafts) secured by privileges and hypothecs against the Group’s assets. Therefore, such secured debt ranks ahead of any unsecured debt including the bond issue.

Coupon

6.0%

Amount Issued

€40,000,000

ISIN Code

MT0000081233

Maturity

The bonds will mature at 100% (par) on 06 March 2024.

Interest Payment

Annually on 6 March

XD Date

19 February

Listing

Official List

Directors

Angelo Xuereb (Chairman and Chief Executive Officer), Michael Warrington, Patrick J. Galea, Michael Sciortino, Philip A. Ransley and Ian Vella Galea (Company Secretary).

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