Download NEW BOND ISSUE 5% €25000000 Tumas Investments plc Bonds

NEW BOND ISSUE
5% €25,000,000 Tumas Investments p.l.c. Bonds due 2024
Issuer
Tumas Investments p.l.c.
Guarantor
Spinola Development Company Limited (SDC)
Issue Price
€100
Coupon
5%
Currency
€ Euro
1
Interest due date
Semi-annually on January 31 and July 31
Redemption Date
July 31, 2024
Issue Size
€25,000,000
Min. Application
€2,000, with multiples of €100 thereafter
2
3
Bond Status
Unconditional, unsecured and unsubordinated
Opening Date
Preferred Applicants – July 10, 2014
Closing Date
July 22, 2014
Intermediaries’ Offer July 28, 2014
Withholding Tax
Applicable at 15 % (unless investor elects to receive interest gross)
Stockbroking Fees
None (as is the case with all new issues)
Issuer & Guarantor – An Overview
The Issuer, as well as the Guarantor, are fully-owned subsidiary companies of Tumas Group Company Limited.
Tumas Investments p.l.c. was incorporated on the November 17, 2000 as a public limited company, and was set up
and established specifically to act as a finance company.
SDC, which was incorporated on May 10, 1966 and was acquired by the Tumas Group in 1986, is a limited liability
company incorporated and registered in Malta. Its immediate holding company is Spinola Investments Limited (C8034). The business of SDC has to date principally comprised the continuous development, management and
operation of the Portomaso complex. SDC is the owner of the site on which the Portomaso complex is built. SDC
effectively owns 100% of the share capital of Portomaso Leasing Company Limited (C-33110), Halland
Developments Company Limited (C-46810) and, as of March 2011, 99% of Premium Real Estates Investments
Limited (C-52247).
In July 2009 the Company issued to the public in Malta €25,000,000 6.25% bonds due 2014 - 2016 having a nominal
value of €100 each and issued at par. The said issue of bonds was regulated by the prospectus dated June 10, 2009
and in virtue thereof the bonds in question are guaranteed by SDC and the issuing Company retained the option,
exercisable at its discretion, to redeem the bonds prior to July 31, 2016. The company has opted to exercise its right
to redeem the aforementioned bond prior to the final date of maturity, and is doing so in terms of the prospectus
dated June 10, 2009.
Introduction and Purpose of Issue
The estimated net proceeds from the issue are expected to amount to €24.5m, and will be used by the issuer to
redeem the outstanding amount of the Maturing Bonds which, as at the date of the Prospectus, amounted to
€25,000,000. Any shortfall will be met by the Issuer through alternative funding sources, including funds making up
the bond redemption fund built up in connection with the Maturing Bonds in accordance with Section 5.8 of the
securities note forming part of the prospectus dated June 10, 2009 issued by the Issuer, which as at December 31,
2013 amounted to €4,000,000.
1 Interest is expected to accrue on the Bonds as from July 31, 2014 at the rate of 5% per annum on the nominal value thereof, payable semi-annually in arrears on each Interest Payment Date –
with the first interest payment being made on January 30, 2015
2 The Bonds constitute the general, direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without any priority or preference among themselves and
with other unsecured debt, if any;
3 The Bonds will, however, rank subordinate to the present and future secured creditors of the Issuer and the Guarantor. Both the Issuer and the Guarantor have certain liabilities which are
secured by hypothecary warranties over assets pertaining to the two entities.
An overview of the trends expected in the key areas of operation of the Guarantor (SDC) in the
foreseeable future follows
The Issuer has been set up to act as a financing company and its business is limited to the raising of capital for the
financing of capital projects and the loaning of such capital to SDC, the collection of interest from SDC and the
settlement, in turn, of interest payable on capital raised from third parties. The Issuer does not have any substantial
assets. Its role is limited to the financing of the Guarantor’s operations and it is, accordingly, fully dependent on the
cash flows of the Guarantor.
The principal business of SDC is the operation of the Portomaso complex, which comprises of sheltered excavated
marina that extends the natural waterfront of the site and serves to enhance the environment of all the constituent
components. These comprise the Hilton Malta hotel (including the convention centre), residential apartments, the
business tower, commercial areas, catering outlets, extensive underground car parking facilities and the marina itself.
The Hilton Malta hotel remains the largest single component of Portomaso’s operations. The incoming travel industry
is currently performing at a strong level and is projected to continue to do so in the foreseeable future. The hotel also
enjoys significant business traveller patronage, and this is expected to continue to increase in line with Malta’s
success as an international business centre, which remains a focal point for Malta’s future development.
Rental operations are expected to yield a steady income stream moving ahead, in line with contracted inflationary
increments. The complex is fully rented and demand for office space remains strong in what remains a primary
premium office location. Portomaso remains a holistic development of complementary activities that make it an
attractive location for tenants. SDC draws comfort from the quality of the counterparties whom the project is housing.
Apart from the Laguna extension (an extension of the Portomaso complex that will include 44 apartments and in
respect of which SDC has commenced excavation works), the main activity of the property division in the coming
years will be that of disposing of the remaining stock of 23 apartments, of which 6 are already the subject of promise
of sale agreements. The Laguna extension will complete the overall project at the high level tone that is expected of
Portomaso. The extension will, however, have a very limited impact on SDC’s business expectations in the period
2014 to 2015, during which it is expected to incur net cash outflows, on construction costs, that will be financed
through separate borrowings sanctioned for the purpose.
Guarantor Financial Anaylsis
4
Consolidated Income Statement for the years ended 31
December
Spinola Development Company Ltd.
Revenue
EBITDA
Net Finance Costs
Profit before tax
Profit after tax
Consolidated Balance Sheet as at 31 December
Spinola Development Company Ltd.
6
Total Assets
Total Equity
Total Liabilities
4
5
6
5
2015
2014
2013
2012
2011
Forecast
Forecast
Actual
Actual
Actual
(€‘000)
(€‘000)
(€‘000)
(€‘000)
(€‘000)
40,008
11,887
(3,857)
2,085
2,651
39,939
12,544
(3,824)
3,163
1,938
38,323
11,696
(4,185)
2,169
1,309
44,414
13,551
(4,212)
4,234
2,660
42,903
11,715
(4,065)
2,742
1,677
2015
Forecast
2014
Forecast
2013
Actual
2012
Actual
2011
Actual
(€‘000)
(€‘000)
(€‘000)
(€‘000)
(€‘000)
145,142
48,585
96,557
141,313
48,122
93,191
141,306
48,367
92,939
146,923
49,281
97,642
132,705
37,736
94,969
A more detailed analysis on the company’s financials is provided in the prospectus dated July 7, 2014
The balance of bank O/D which in the annual financial statements of the Guarantor is recognised as current borrowings, is being netted with available cash
A recent valuation of all the property of SDC (with the exception of the Halland site and the land to be developed for the Laguna Project) that was prepared in connection with this bond issue
valued the property to be worth €143,000,000, opposed to a book value of €97,300,000
Key Ratios
Interest Cover (times)
(EBITDA/Finance Costs)
Gearing Ratio (%)
2015
2014
2013
2012
2011
3.08
3.28
2.79
3.22
2.88
56.5
53.6
51.3
50.8
59.3
5.33
3.98
2.71
5.4
4.44
1.45
2.27
1.52
2.87
2.06
7
(Net Borrowings/(Total Equity + Net Borrowings))
Return on Equity (%)
(Net Profit/Total Equity)
Return on Assets (%)
(Profit before Tax/Total Assets)
Investment Risk Considerations
All debt instruments such as bonds are potentially exposed to credit and interest rate risk. Debt securities may be
subject to the risk of the issuer’s inability to repay capital originally invested and/or interest payments on the obligation
and may also be subject to price volatility due to such factors as interest rate sensitivity, adverse exchange rate
movements, market perception of the creditworthiness of the Issuer, general market liquidity, and other economic
factors. All of which could have either a direct or an indirect impact on the tourism and leisure industry – of which the
company’s core operations form part of.
When interest rates rise, the value of corporate debt securities can be expected to decline. Fixed rate transferrable
debt securities with longer maturities tend to be more sensitive to interest rate movements than those with shorter
maturities.
8
A number of other related risks - a list that is not exhaustive – include the following:
i.
ii.
iii.
iv.
v.
vi.
This Securities Note contains forward-looking statements. Such forecasts and projections do not bind the
Issuer or the Guarantor with respect to future results and no assurance can be given that future results or
expectations covered by such forward-looking statements will be achieved. These statements by their nature
involve substantial risks and uncertainties, a few of which are beyond the Issuer’s and Guarantor’s control.
Potential investors in the Bonds must determine the suitability of the investment in the light of their own
circumstances.
Application has been made to the Listing Authority for the admissibility of the Bonds to listing and to the Malta
Stock Exchange for the Bonds to be listed and traded on its Official List. There can be no assurance,
however, that an active secondary market for the Bonds will develop or, if it develops, that it will continue, nor
can there be any assurance that an investor will be able to re-sell his Bonds at or above the Bond Issue
Price, or at all.
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.
Investment in the Bonds involves the risk that subsequent changes in market interest rates may adversely
affect the value of the Bonds.
The Issuer may incur further borrowings or indebtedness and may create or permit to subsist other security
interests upon the whole or any part of its present or future undertakings, assets or revenues (including
uncalled capital).
Guarantee
The Bonds shall constitute the general, direct, unconditional and unsecured obligations of the Issuer and shall be
guaranteed in respect of both the principal amount and the interest due under said Bonds by the Guarantor. This
means that bondholders will rank pari passu (equally) with the other unsecured creditors of the Issuer. In addition, the
Bonds are being guaranteed by the Guarantor and, therefore, bondholders are entitled to request the guarantor to
pay both the principal amount and the interest due under said Bonds if the Issuer fails to meet any amount. The
Guarantee also entitles the bondholders to take action against the Guarantor without having to first take action
against the Issuer. The strength of the Guarantee is directly linked to the financial position and solvency of the
Guarantor.
7
Gearing ratio is expected to increase over the coming 2 years which will be fully funded by banking facilities. The expected cost of the refurbishment is €9,000,000 and is fully funded by banking
facilities with €2,000,000 expected to be drawn during 2014 and €7,000,000 throughout 2015.
8
Refer to the relevant Prospectus for further information
Application procedure & Allocation
Applicants are to complete application forms provided to them by the issuer and return to us as early as possible.
Cheques are to be made payable to “The Registrar – Tumas Investments p.l.c. Bond Issue”. Interested clients
should refer to the Prospectus dated July 7, 2014 which may be obtained from our office in hard copy or electronically
by e-mail on request.
The Issuer shall allocate the Bonds on the basis of the following policy and order of priority:
i.
ii.
iii.
First to Preferred Applicants (Application Form A) up to the extent of their holdings of Maturing Bonds on
the Cut-off Date rounded upwards to the nearest €100 and subject to a minimum application of €2,000;
The balance of the Bonds not subscribed for by holders of Maturing Bonds on the Cut-off Date limitedly
by means of a Maturing Bond Transfer shall be made available for subscription to Preferred Applicants in
respect of any additional Bonds applied for other than by Maturing Bond Transfer and to holders of 2017 2020 Issuer Bonds (Application Form B) on the Cut-off Date;
In the event that following the allocations made pursuant to paragraphs (i) and (ii) above there shall still
remain unallocated Bonds, the Issuer shall offer such remaining Bonds to Authorised Intermediaries
through an Intermediaries’ Offer, which will be taking following the closing of the issuance period and July
28, unless otherwise stated.
No preference shall arise with respect to the excess Bonds applied for but such excess Bonds shall, together with
applications by holders of 2017 – 2020 Issuer Bonds on the Cut-off Date, be subject to such allocation policy as shall
be determined by the Issuer.
Holders of Maturing Bonds on the Cut-off Date who do not elect to avail themselves of the possibility to exchange
their investment in terms of the procedure outlined herein shall receive all capital and accrued interest to date on the
July 31, 2014.
You may contact us by phone on freephone number 8007 2206 or speak to our Investment Advisors at one of our
branches in Valletta, Birkirkara, St. Paul’s Bay or Ta’ Xbiex. We will be pleased to answer any queries you may
have on this issue and assist in the completion of all the necessary forms.
The information contained in this document is believed to be correct, but cannot be guaranteed. Any opinions expressed herein are
given in good faith at this date and may be subject to change without notice. This information is not intended to constitute an offer
or agreement to buy or sell investments. The investments referred to in this document may not be suitable or appropriate for every
investor. No liability is accepted whatsoever for any loss howsoever arising from any information in this document. The value of
investments can go down as well as up. Investors may get back less than their initial investment and past performance is no
guarantee of future performance. Jesmond Mizzi Financial Advisors Limited is licensed to conduct the business of investment
services by the Malta Financial Services Authority, Notabile Road, Attard BKR3000, Malta, and is a member firm of the Malta
Stock Exchange, Garrison Chapel, Castile Place, Valletta VLT1063, Malta. Jesmond Mizzi Financial Advisors Limited or a
connected company, their clients, officers and employees may have a position or engage in transactions in any of the investments
mentioned.