Borza Malta Stock Exchange

Malta’s corporate bond market has doubled in size since 2014, and now has a value of over €2 billion entering its 30th year of operation.

The landmark figure was reached following the acceptance of a successful €80 million fundraising round by International Hotel Investments plc to the Malta Stock Exchange’s Regulated Main Market.

A further €88 million in 21 smaller issues is found in the Prospects Multilateral Trading Facility (MTF).

Stockbrokers and financial advisors Rizzo Farrugia marked the occasion, describing it as an “important milestone”.

Exploring the reasons behind the rapid growth in the Maltese corporate bond sector, the firm pointed to the steep decline in secondary market yields across the eurozone following the accommodative monetary policy conditions adopted by the European Central Bank via its various quantitative easing programmes.

“The decline in yields ought to have made it more attractive for companies to consider debt funding from the general public,” it said.

“Moreover,” it continued, “several companies may have also started to appreciate the benefits of diversifying one’s sources of borrowings and not be strictly dependent on banks. The mix of funding sources could provide multiple benefits to certain companies that would need to maintain a certain element of long-term funding/borrowings in order to optimise shareholder returns.”

Finally it also called on companies to adopt a more effective communications strategy to enable investors to remain abreast of industry-wide developments.

“Although some companies organise annual meetings for financial analysts to delve deeper into their financial highlights, this practice is not that widespread and all companies should actively seek to discuss their business strategy to enable the market to gauge their financial soundness.”

Make up of the corporate bond market

In 2021, three companies entered the bond market for the first time.

GO plc issued €60 imllion in bonds, Brown’s Pharma Holdings plc issued €13 million, and Dino Fino Finance plc issued €7.8 million. Moreover, Mizzi Organisation Finance plc returned to the bond market for the third time in its history with a €45 million bond issue.

Smartcare Finance plc and Central Business Centres plc also utilised the bond market, partly to refinance existing bonds and also raise additional funding for new projects.

The largest issuer, Rizzo Farrugia noted, is the Corinthia Group (incorporating International Hotel Investments plc, Corinthia Finance plc and Mediterranean Investment Holdings plc) remains the largest issuer, with a total bond issuance of €385 million accounting for 18.8 per cent of the overall market.

The Hili Ventures Group (incorporating 1923 Investments plc, Hili Finance Company plc, Premier Capital plc and Hili Properties plc) accounts for another 12.6 per cent of the overall bond market with a total bond issuance of €258 million.

Bank of Valletta plc is the third largest issuer with total bond issuance of €161.6 million, representing 7.9 per cent of the bond market.

Following the €60 million bond issue this year, the GO Group (incorporating GO plc and its 62.2 per cent owned subsidiary Cablenet Communications Systems plc) accounts for just under 5 per cent of the overall corporate bond market.

Going forward

“Since the beginning of December,” stated the stockbroker, “another three companies announced that they obtained regulatory approval for new bond issues.

“GAP Group plc are offering the option to holders of the €19.2 million 4.25 per cent secured bonds due in October 2023 to exchange their bonds into a new offering of €21 million secured bonds at a rate of 3.9 per cent due to be redeemed between 2024 and 2026.

“AX Real Estate plc (a subsidiary of AX Group plc) announced a dual offering made up of up to 50 million shares at a price of €0.60 per share together with a €40 million bond issue at a coupon of 3.5 per cent and redeemable in 2032.

“Moreover, St Anthony Co plc announced the issue of €15.5 million secured bonds at a coupon of 4.55 per cent and due for redemption in 2032.”

Meanwhile, during the course of next year, there are three bonds that are up for redemption, namely the €29.2 million 3.65 per cent GAP Group plc in April, the €40 million 5 per cent Mediterranean Investment Holdings plc in July and the €21.5 million 6 per cent Pendergardens Developments plc also in July.

Rizzo Farrugia said it hopes that the “strong momentum” going into next year with the three new issues by GAP, AX and St Anthony will be maintained during the course of 2022 in order to enable the numerous retail investors to continue to seek to diversify across different companies and possibly also different economic sectors.

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