On 31 May 2017, Tumas Investments plc announced that it received approval for the issuance of €25 million 3.75% unsecured bonds maturing in 2027.
The salient details of the new bond issue are as follows:
Spinola Development Company Limited, a private limited liability company registered in Malta with company registration number C 331.
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 to 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. Furthermore, subject to the negative pledge clause set out in sub-section 6.9.2 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 B 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 Spinola Development Company Ltd
Interest Payment Date:
Annually on 10 July (first interest payment date is 10 July 2018)
The bonds will mature at 100% (par) on 10 July 2027.
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 €24.55 million after issuance costs, will be used by the Issuer for the redemption of the outstanding amount of the 6.2% Tumas Investments plc 2017/20 which will be redeemed on 10 July 2017, being the the first possible early redemption date.
Deadline for ‘Preferred Applicants’:
Wednesday 21 June 2017 at 09:30 hrs with applications for a minimum of €2,000 and in multiples of €100 thereafter.
‘Preferred Applicants’ are holders of the 6.2% Tumas Investments plc 2017/20 bond 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.
Official List of the Malta Stock Exchange
Prospective investors are urged to read the Prospectus issued by Tumas Investments plc dated 29 May 2017 including the Risk Factors which are found in the Registration Document on pages 22 to 26 and in Section 2 of the Securities Note found on pages 62 and 64. 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.
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.
Essential information on the key risks specific to the Issuer and the SDC Group:
The Issuer itself does not have any substantial assets and is, essentially, a special purpose vehicle set up to act as a financing company solely for the needs of the SDC Group and, as such, its assets consist primarily of loans issued to SDC Group companies. The Issuer is dependent on the business prospects of the SDC Group and, consequently, the operating results of the SDC Group have a direct effect on the Issuer’s financial position. Accordingly, the risks of the Issuer are indirectly those of the SDC Group, and, in turn, all risks relating to the SDC Group are the risks relevant to the Guarantor:
i. The SDC Group, and the wider Tumas Group generally, has a long trading history in mixed-use real estate developments that consist principally of hotels, residential and office property. The Portomaso complex is affected across the span of its components by business liquidity and economic conditions both locally and overseas. Furthermore, the operation of the Hilton Malta hotel is, in part, subject to the risks normally associated with the incoming tourism industry. The SDC Group’s operations and the results of its operations are subject to a number of other factors that could adversely affect the SDC Group’s business, many of which are common to the hotel and real estate industry and are beyond the SDC Group’s control.
ii. Real estate development projects are subject to a number of specific risks, many of which are beyond the SDC Group’s control, including: the risk of cost overruns; insufficiency of resources to complete the projects; and general industry trends, including the cyclical nature of the real estate market. If any such risks were to materialise they would have an adverse impact on the SDC Group’s revenue generation, cash flows and financial performance.
iii. No assurance can be given that sufficient financing for its current and future investments will be available on commercially reasonable terms or within the timeframes required by the SDC Group, also taking into account the need, from time to time, for the SDC Group’s properties to undergo renovation, refurbishment or other improvements.
iv. Property values are affected by, and may fluctuate, inter alia, as a result of changing demand, changes in general economic conditions, changing supply within a particular area of competing space and attractiveness of real estate relative to other investment choices. The value of the SDC Group’s property portfolio may also fluctuate as a result of other factors outside the SDC Group’s control.
v. In view of the fact that the SDC Group is, in part, a property holding organisation, coupled with the fact that property is a relatively illiquid asset, such illiquidity may affect the SDC Group’s ability to vary its portfolio or dispose of or liquidate part of its portfolio in a timely manner and at satisfactory prices in response to changes in economic, real estate, market or other conditions, or the exercise by tenants of their contractual rights such as those which enable them to vacate properties occupied by them prior to, or at, the expiration of the lease term.
vi. All industries, including the leisure and real estate / property development industries, 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 SDC Group’s future cash flow, results of operations or financial condition.
vii. Historically, the SDC Group has maintained insurance at levels determined to be appropriate in light of the cost of cover and the risk profiles of the businesses in which the SDC Group operates. With respect to losses for which the SDC Group is covered by its policies, it may be difficult and may take time to recover such losses from insurers. In addition, the SDC Group may not be able to recover the full amount from the insurer. No assurance can be given that the SDC Group’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.
Essential information on the key risks specific to the Bonds
i. 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.
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 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 to 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.
vi. 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.
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 acted as Sponsor to the Tumas Investments plc bond issue.
This webpage has been prepared based on the Prospectus dated 29 May 2017 issued by Tumas Investments 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.