5 - 11 April 2001

Verdala Mansions to raise Lm3m through secured note issue

Verdala Finance plc is to raise the finance for the completion of its luxury apartments project in Rabat by means of a secured note issue of Lm3 million. The issue, subscriptions for which opened last Monday and close on 11 April, is being offered at 8 per cent per annum, and is redeemable at a premium of a further 1 per cent per annum. This means a 9 per cent per annum yield to investors. The vehicle used for raising the finance is Verdala Finance plc, which will then – through an internal loan agreement – lend the money to Verdala Mansions Ltd, which is the AX Holdings company set up to develop the site.
The issue is not being listed on the Malta Stock Exchange. The reporting accountants are Deloitte & Touche, and the legal advisers are Camilleri Preziosi Advocates. It is being managed by Globe Financial Management plc. James Blake, deputy chairman of Globe Financial Management, told The Malta Business Weekly that the difference between this “note” and a ëbondí is just one of nomenclature. “Bonds are generally listed on the Stock Exchange,” he said. “We are calling this issue a “note” because it is not listed. There is no other fundamental difference.”
Thirty thousand secured notes of a nominal value of Lm100 each are being offered to the public. The minimum subscription is of Lm25,000, increasing in multiples of Lm1,000 thereafter. The security offered for these notes is 31 of the 36 luxury apartments that will form part of the Verdala Mansions complex. Mr Blake, referring to the Offering Memorandum, says that the value of this property is actually more than the Lm2 million secured against it. “Each apartment has an approximate market price of around Lm240,000,” he says, “which works out at close to Lm7.5 million.”
Mr Blake is careful to explain that much thought and planning has gone into structuring the repayment of these secured notes when the time comes to do so, five years from now. “We have structured a sinking fund that will have the money ready for the repayments, with the premium, in 2006,” he says.
Each time an apartment at Verdala Mansions is sold, 60 per cent of the money goes into the sinking fund. Should this not happen, Bank of Valletta, which is the trustee, will not release the hypothec and permit the sale to go through. Bank of Valletta will administer the sinking fund.
Investors are not being asked to pay the full amount up front. “Verdala Mansions Ltd do not need the entire sum immediately,” says Mr Blake. “Investors are expected to pay 67 per cent of their investment now, with the remainder being paid not earlier than 1 December this year, and not later than 1 April next year, subject to a 30-day notice in writing. Investors will also benefit from a commitment fee of 0.5 per cent per annum, on the remaining unpaid amount of 33 per cent up to such payment.” There will have to be written notice of 30 days.”
Interest will be paid annually in arrears, and the notes will not be redeemed at par, but at a premium of 1 per cent for each of the five years. Redemption will take place five years from now, but the company is reserving the option to redeem the notes before that, though certainly not earlier than 11 April 2003.
The 36-apartment Verdala Mansions will be built on three tumoli of land overlooking the valley sweep below Rabat. The land, valued at a current market price of Lm2 million, was bought by AX Holdings in 1997. Excavation began last September, with the completion of basic construction scheduled for this summer. Finishing works are planned for completion in a yearís time. The apartments are in close proximity to the Grand Hotel Verdala, which is going through a major refurbishment programme in readiness for its management by Regent Hotels.
For more information on the secured note issue, contact your licensed financial services adviser, or call Globe Financial Management plc on 310088.