Melita bonds to be listed on alternative MSE listing
Charlot Zahra
The €25 million bonds issued by telecoms operator Melita will be listed on the secondary listing on the Malta Stock Exchange (MSE), rather than on the main listing.
Melita plc Chairman Joseph Gasan said that “The size and status of the companies who are the shareholders of Melita Cable was such that a primary listing on the MSE would not be appropriate”.
He was speaking on Monday during the announcement of a €25 million in 7 year bonds, paying 7.15 per cent interest, by Melita Capital p.l.c. The bond offer has an option for another €5 million in case of over-subscription, for a total of €30 million in bonds.
However, there is also a technical reason for this, since the company used to issue the bonds – Melita Capital plc – has been just set up and therefore does not have a trading record.
After Melita plc had been gone a leveraged buy-out in July 2007, the company structure made it difficult to issue bonds from it. Therefore the company directors decided to set up a separate company in order to issue the bonds.
A leveraged buyout occurs when a financial sponsor acquires a controlling interest in a company’s equity and where a significant percentage of the purchase price is financed through borrowing.
The assets of the acquired company are used as collateral for the borrowed capital, sometimes with assets of the acquiring company.
Melita Capital was backed by Melita Infrastructure, which owns the submarine cable, and Melita Mobile, the company running Melita’s 3G mobile service. Together, the two companies had invested €50 million in Melita’s infrastructure.
Melita Capital will be using the €30 million in proceeds with a €7.5 million loan to Melita Infrastructure to refinance the company’s project funding for the submarine cable, and a €17-22 million loan to Melita Mobile to refinance the company’s project funding as well to meet the subscriber acquisition costs and further capital expenditure with the installation of new infrastructure to meet the demands of an increasing subscriber base.
“Over the past 2 years, Melita has continued to experience substantial growth in subscriptions, products and services even during a tougher economic climate,” Gasan said.
Melita plc has just been awarded a multi-million Euro contract by DANTE, an EU-funded operation, to supply the University of Malta with high quality international bandwidth linking Malta to mainland Europe and Israel thus enabling the UOM to participate actively in GÉANT2. GEANT 2 is an EU-wide network.
The system, which is managed by the Cambridge-Based DANTE (Delivery of Advanced Network Technology to Europe), interconnects over 30 million researchers spanning 34 European countries and links to a number of other world regions.
Back in 2007 Melita attracted €165 million for the leveraged buyout agreement, and now the shareholders have invested a further €50 million to strengthen Melita’s infrastructure.
Gary Quin, member of the Board of Directors and Bond Issue Project Leader, explained that Melita’s foreign shareholders – telecoms company GMT Communications Partners (GMT), who has a majority shareholding in Melita plc, venture fund firm M/C Venture Partners, Gee Five Limited, wholly owned by the Gasan Group, and Blackrock Communications - have been involved in over thirty launches of mobile operators, “all being cases where the new mobile provider was the second or third player in that market, and accordingly faced competitive threats and opportunities similar to those experienced by Melita Mobile.
“All launches were indeed successful from a profit-generating perspective as well as from a value-generating perspective,” Quin explained.
The business strategy underlying these launches was focused on a combination of “the drive to provide a top quality network to consumers, a value-led pricing strategy, and a trusted brand.
“All of the markets in question, as in Malta, were characterised by a strong demand for a value-driven operator to break strongly-held pricing patterns for the benefit of local consumers,” he added.
Melita Mobile currently has 25,000 customers, with a split of 85 per cent post-paid and 15 per cent pre-paid, which is an unusual split for the local market, which is currently 14 per cent post-paid and 86 per cent pre-paid.
The company would make bi-annual payments in March and September. Pre-placements of up to 60 per cent of the €30 million would be accepted on 24 September 2009.
€3 million are also being reserved for preferred applicants defined as Directors and employees of Melita plc.
Forms and copies of the prospectus are available from all branches of leading banks and authorised financial intermediaries.
Subscriptions open on 28 September 2009 and close on 2 October 2009, however the bond might close earlier if over-subscribed.
The bonds might be redeemed earlier at the issuer’s discretion between 2014 and 2016.
Melita plc, then known as Melita Cable Television, launched its cable television services in June 1992 providing home entertainment to thousands of households across Malta and Gozo. Today Melita provides its television services to over 100,000 homes.
Melita is also a leading supplier of broadband internet with 52 per cent of internet users using a Melita’s cable internet.
Since November 2006, Melita launched a fixed-line telephony service, capturing approximately 25 per cent of the fixed telephony market to date.
In February 2009, Melita launched its 3G mobile service with nationwide coverage, attracting 25,000 new mobile subscribers in the first six months.
