Total solutions

MATTHEW VELLA meets corporate financial specialist Alain Mangion to see how golden advice and a tax-friendly island in the Mediterranean has made Credinvest International a unique corporate finance boutique.

There’s no drawled voice slapping figures and business jargon around, white-collared shirts or braces. A sedate atmosphere at Credinvest’s Valletta palazzin greets one unexpectedly – this is a firm handling million-dollar projects for companies and governments in Eastern Europe and the Maghreb. But suits there are little. Except for managing director and founding partner of Credinvest International, Alain Mangion.
There’s a handsome portfolio that makes Credinvest’s ten-year history a prolific one as firm with a potent contact and skills base to know what is the most appropriate business solution to a particular project. Typical mandates include advising a UK-based investment company on the acquisition of a minority shareholding in an Italian regional television, arranging financing for the stadium construction in Italy, advising Italian cheese producers on distribution and branding, and so forth up in eastern European and back down to Tunisia, Libya and Morocco.
"We are also providing business solutions in Iran," Alain Mangion says. "People might say ‘who on Earth wants to take on Iran?’, but yes, there are banks out there covering Iran, and it is a very critical emerging market for technology, and engineering related to oil energy infrastructure.
Alain Mangion, an accountant by profession, advises clients on all financing aspects including project finance, mergers and acquisitions, and international and emerging project finance.
In 1993, he decided to set up Credinvest International, a boutique corporate finance solutions firm working to advise companies on how to finance their projects and how to come up with the appropriate cost-effective structures.
"It didn’t take long for me to realise that the skills and contact base I had built in Malta could be successfully replicated outside the island and not only exclusively in Malta. And now I am pretty proud to say that this firm is a total exporter of service."
The firm got its break when Mangion met Filippo Pontiero, a business advocate who is also a consultant to the Italian Ministry of Foreign Affairs. He operates from Italy, from where the firm gets the majority of its deals from: "We realised that in spite of their size, Italian banks were not providing their customers, especially self-made entrepreneurs and medium-sized companies, with the service they needed in emerging markets outside Italy. We took hold of this niche and therefore, our first client base came from Italian exporters seeking to organise financial packages for their projects in international markets."
Credinvest also works for clients locally. It is currently making an offer to the government of Romania for the purchase of 52 train carriages. It is also working with the government of Bulgaria to finance a new cardiac hospital.
"These projects came because over the years we built a network of partners and associates in these markets, so the inflow comes directly from there."
Credinvest’s international structure spans the eastern bloc quite extensively, with partners and associates in the Czech Republic, Slovenia, Hungary, Romania, and Bulgaria and also Russia, as well as the UK and Turkey. Now they are looking to develop their contacts at state-level in Poland and the Baltic States.
The dynamic that makes Credinvest such a vital partner to private companies and governments is however closer to home, namely tax-friendly Malta.
"A part of our business comprises the management of International Trading Companies and trusts in line with the financial services legislation. We do this to provide a one-stop solution for our client.
"Picture the scenario: we have an Italian exporter, looking for a financial package to finance a project in Romania and then looking to ensure the whole structure we create for him is tax-friendly. By creating the structure with trusts and ITCs and putting finance in the equation, we come up with a one-stop solution complete with finance and friendly tax management."
Location, location, location. This time not the real estate tenet, but the one which makes Malta such a beneficial fiscal regime.
With double taxation treaties with over 20 countries and special fiscal treatment to shareholders in companies based outside Malta, the island offers extensive relief from taxation grief. Trusts registered in Malta offer tax-free asset transfers, zero succession duties and a fixed $600 government fee on trust income every year.
Over 1,800 structured offering such services, complete with multi-lingual staff and EU-type legislation, are making Malta a real international financial trading centre.
And things have changed in Malta’s financial services sector. Malta’s legislative framework today makes its financial services industry one to reckon with. Two years ago the island finally broke off its romance with its status as an offshore bank and tax haven, to a proper EU-type financial centre via the Malta Financial Services Authority.
A year into possible EU integration, three into joining the Euro, Government’s one-off tax on declared foreign financial assets enabled over Lm200 million to be brought back into Malta. This is good news for Malta’s financial sector. Alain says that although Malta has a good financial services framework, forthcoming EU membership tends to give potential investors a subconscious comfort that the business environment is in line with a certain standard of practice to which they are accustomed to - a proper economic framework, protection of deposits against banking failure and rule of law.
Lack of confidence and foresight is still stifling that push outwards, back into a sometimes regressive, inward-looking business mentality. The stock exchange does not enjoy much confidence, with tens of businesses still refusing flotation and diluting family control. Neither does the public fancy the equity market, whose real pets are bonds.
"I think a bit more drive is necessary. We have all the ingredients to make Malta a much larger and therefore more profitable financial services centre. The right legislation is all in place, we have a good skills base, good bankers, tax lawyers, and accountants. We just need to find the appropriate niches to develop more one-to-one marketing, with fund managers for example. In spite of a little bad publicity it had in the past, we should be looking at the potential of the hedge-funding industry in using Malta as a base. I think it’s all up to us to find these opportunities.
"In terms of economic development, loads of progress has taken place but there’s room for more improvement. We need to be extremely wary of the competitive threats to Malta. In terms of industry we must never lose sight of the fact that Malta might be joining the EU shortly. Together with Malta, many Eastern European markets will be joining where there are still employees earning $100 to $150 a month, rather than in a week as in Malta.
"That has a significant bottom-line impact on anyone interested in foreign direct investment. So economically, anything industrial in Malta which is of a low-cost manufacturing nature, these entrepreneurs should not be afraid to go an set up their own plant in the emerging Eastern European market. There are currently around 10,000 Italian-owned factories in Romania. If anyone thinks that a shoe is made in Italy they are wrong. It is either made in Romania or in China!
"Basically we have to focus on productivity and quality, which are industrial niches that cannot be replaced by an Eastern European worker that does not cost anything to employ and therefore taking on ten of them. It’s not the same as employing someone who gives you a quality product.
"We need to take a hard look at other ancillary costs such as shipping and telecoms and costs which are all overhead, and see if there are ways of reducing them and not overpaying for, say port services. Otherwise, I personally tend to agree very much with Government’s strategy for Malta as a hub even for services such as Lufthansa Technik. I think that is a great idea and should not be over-marketed."
Alain says he would like to see a greater degree of encouragement and incentivisation not only for foreign direct investors but also for the Maltese entrepreneur to go abroad.
"For Malta to develop properly, the Maltese businessman must be as comfortable doing business in Bucharest as he is in Bugibba and in Modena as he is in Mosta. Because that is the way it works. Globalisation is not just a fancy word. Today you must be able to make the same amount of business and understand the needs of those markets anywhere you are. The Maltese product is a sound product. Why shouldn’t we look into the creation of services in foreign markets?"
He looks at the opportunities open to Maltese manufacturers and producers in foreign lands as possible and feasible with the right services to support the need for finance and contacts. Eyeing the North African markets, Alain Mangion says there are loads of training schools in Malta which could easily function profitably in countries with a hunger for education.
Credinvest’s other interesting niche, making it a first on the island, is certainly sports financing. The firm finances sports cubs and their transactions throughout Europe, in particular Italy, providing credit insurance for the financing bank against default by borrowing clubs.
Typical transactions include: the financing of the transfer of players from seller to buyer and vice-versa; financing of deferred payments due from television rights to clubs and sports organisations; financing of annual deferred payments due from sport sponsorships; and funding for sport infrastructures, such as ground development or construction of new football stadiums and facilities through the acceleration of future cash flows.
"It’s a niche we developed almost by chance, talking about entering certain sectors by pure serendipity. We found it interesting to be able to advise the presidents of different sports clubs with regards to different ways of financing a football team. In a way we developed a sort of factoring service for sport clubs.
"At the moment, our main footballing project is in Italy, working closely with the Naples city council, who invited us to advise them on the manner the stadium it can be developed to provide a more consistent cash flow. As in all countries, a stadium is a prime piece of real estate used once every two weeks for a football match."