On 22 July 2021, Melita Finance plc issued an announcement providing an update on the business of Melita Properties Srl which is the operating arm of Melite Group and the principal debtor of Melite Finance as it holds title as lessee to 22 retail stores in the North of Italy.
Following the onset of the COVID-19 pandemic, Melite Properties engaged in discussions with real estate agents and potential new tenants expressing an interest in 21 of the stores previously operated by Melite Italia Srl which is currently in voluntary administration. These discussions were in the main aimed at preserving the rights that the Group has over its various leases. Moreover, a restructuring plan was agreed to by the Group which, amongst other things, comprised the rescission of certain stores and the flipping of other stores to third party operators.
With a view to channelling all available cash towards safeguarding the more valuable leases essential to secure the fulfilment of the Group’s obligations and long-term survival, Melite Properties identified additional stores for rescission (over and above the three stores which were already rescinded in 2019). In fact, over the course of 2020, a notice of rescission was served with respect to four stores, of which two have been concluded whilst the other two are subject to ongoing discussions with regards to possible penalties for early termination. Moreover, in 2021, notice of rescission was also served for one store in Milan in respect of which favourable terms could not be secured from the relative landlord, as well as two other stores situated in train stations located in Milan and Turin. Discussions with respect to such three stores remain ongoing with regards to possible penalties for early termination.
In the context of the above, the Group noted that by the end of April 2021, out of the 19 stores:
- One store was vacant;
- Seven stores were sublet to various third-party operators unrelated to the “Accessorize” brand; and
- Eleven stores, which operated under the ‘Accessorize’ brand, were flipped.
Subject to an auction process that is to be undertaken in terms of the voluntary administration proceedings which Melite Italia is currently undergoing, a single third-party retail operator submitted an irrevocable offer for the rental and subsequent purchase of the branch of business operated by Melite Italia. The offer is related to the sub-lease of nine stores held by Melite Properties with the possibility of an additional two. Following lengthy negotiations, a final agreement was reached with respect to the said eleven stores (which are located in Bolzano, Como, Florence, Padua, Pavia, Milan, Turin and Treviso) in terms of which such stores, all previously sub-leased by Melite Properties to Melite Italia and operating under the ‘Accessorize’ brand, have been sub-leased to the said third-party retail operator with effect from 21 June 2021 in the case of ten stores, and with effect from 26 July 2021 in the case of the remaining store.
This third-party operator, which has its own brand across more than 80 stores all over Italy, has also agreed with Melite Italia to take responsibility for the ‘Accessorize’ franchise in Italy. The nine stores were sub-leased by Melite Properties to the operator on a fixed rent basis. On the other hand, the remaining two stores which are currently sub-leased by the same operator, are to remain on sub-lease but are subject to an option to convert to a purchase of branch of business. Moreover, these two stores which are currently subject temporarily to the payment of rent based on profitability, will revert to a fixed rent basis in April 2022.
Whilst the conclusion of these agreements constitutes a significant development in the business of Melite Properties, the Group explained that it remains cautious that the position in Italy, and that of its business, remain subject to a variety of factors which are not within its sphere of control or influence. Although the Group continues to closely monitor the situation, the position remains a constantly and rapidly developing one.
In conclusion, Melita Finance noted that it intends to call a meeting of Bondholders for the purpose of putting forward proposals in relation to the revision of certain terms of the bonds in issue, with a view to reflecting the economic realities which the Group are facing and will continue to face. Further information relative to the holding of such meeting in the coming weeks is due to be published shortly.