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Details of MGP bond issue
to be announced tomorrow
by David Kelleher
Details of the outcome of the Malta Government Privatisation
bond issue are expected to be released tomorrow, three days
after it closed, The Malta Business Weekly has learnt.
However, the delay in announcing how well the bond issued fared
has led financial analysts to query the success of the MGP issue.
Contacted yesterday, a number of financial analysts said that
two factors showed that the issue may not have done as well
as the company set up by the government may have expected.
“There are two important factors. First, the issue did
not close early, a clear indication that the issue was not oversubscribed.
That it closed on the pre-announced date could also indicate
that a number of bonds still have not been taken up,” one
financial analyst said.
Contacted yesterday afternoon, Mr Tom Anastasi Pace, general
manager financial markets at Bank of Valletta, the bond issue’s
underwriter, said the bank would be giving a presentation to
MGP plc today and a press statement would be issued tomorrow.
Sources close to the financial markets told The Malta Business
Weekly yesterday that from the moment the bond issue was announced,
there was a high level of scepticism that it would do well.
“There was very little incentive for investors to part
with their money to invest in the MGP bond issue. With no coupon
and only a 15% premium on maturity, there was little else to
attract the investor. The only advantage is that one is given
preferential status when a share issue is announced by one of
the four companies being privatised by the government,”
the sources said.
“Secondly, investors who decide to convert their bonds
into equity, have to forfeit the 15 per cent premium. The way
the bond issue was structured lacked incentives to attract investors.
That is probably why the bond issue was not taken up quickly.
The Datatrack issue was oversubscribed within hours, but the
MGP issue remained open for 15 days. Nearly all previous bond
issues were closed early,” the sources added.
Other sources close to Malta Government Privatisation plc said
yesterday that the main problem was that although the major
companies had invested, the public at large had not shown enough
interest. The same sources would not say how many bonds had
been bought.
MGP plc was offering for sale at par in Malta and abroad Lm10
million in five-year bonds, each having a nominal value to Lm100.
These bonds can be redeemed on maturity at a price of Lm115,
a premium of 15 per cent on their nominal purchase price. In
view of the premium, no interest will be paid on maturity.
The proceeds of the issue will now be reinvested by the company,
pending conversion, to buy government paper that is already
available on the market, and which is guaranteed by the government.
While non-resident Bondholders are not taxable in Malta on interests
and premia received and will hence receive the premium gross,
bondholders resident in Malta will have the option of being
paid the premium net of tax at source at the rate of 15 per
cent. This withholding tax is currently considered as a final
tax and the bondholder will not need to declare the premium
so received in his income tax return.
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