Stock Market Review - Midi's €30 million 7% bond issue

Midi plc, the developers of Tigné Point and Manoel Island, launched a €30 million bond issue which is being offered in both euro and sterling. The sterling tranche aims to attract those investors who hold low-yielding sterling investments and who would prefer to hold onto the British currency following its recent strong decline in value against the euro.

The Midi bonds carry a coupon of seven per cent per annum and mature on December 15, 2018 or at the discretion of the Issuer on any date between December 15, 2016 and December 14, 2018 by giving not less than 60 days notice of redemption. The company also reserves the right to increase the issue up to €40 million in the case of over-subscription.

A pre-placement stage of subscription for a maximum of 40 per cent of the total aggregate amount of the bond issue, will take place on January 12. Applications at the pre-placement stage will be for a minimum of €10,000 (nominal) or £8,700 (nominal). Subsequently the public offer will open on January 13 and close on January 20 or earlier in the event of over-subscription. Applications for the public offer are for a minimum of €2,500 (nominal) or £2,000 (nominal). The company has submitted an application for the bonds to be admitted to the Official List of the Malta Stock Exchange.

Investors should note that the bonds constitute unsecured and unsubordinated debt obligations of the issuer and will rank pari passu without any priority or preference with all other present and future unsecured and unsubordinated debt obligations of Midi plc. As from the financial year ending December 31, 2009, the company will build a reserve account out of its annual surpluses, in anticipation of the eventual repayment of the bonds. The reserve account, at the maturity date of the bonds, will be equivalent to a minimum of 50 per cent of the total outstanding amount of the bond issue. This bond issue is not underwritten and the company reserves the right to refuse all applications and refund the monies received accordingly in the event that the amount of the bonds amounting to €30 million is not fully subscribed to.

Midi plc is a consortium, originally formed in 1992, responsible for the regeneration, development and operation of Tigné Point and Manoel Island following the granting of a 99-year emphyteusis from the government on June 15, 2000. Midi's shareholders include some of the top corporate names in Malta such as Alf. Mizzi & Sons, Bank of Valletta plc, Middle Sea Valletta Life Assurance Company, members of the Gasan and Mizzi families as well as Lombard Bank.

At present, the Midi Group is composed of the parent company, Midi plc and its wholly owned subsidiaries through which the group operates. The company fully owns Tigné Point Marketing Limited (TPML - the main contact point for customers), Tigné Contracting Limited (TCL - the Group's turnkey company) and Tigné Mall Limited (TML - responsible for building and subsequently operating the retail mall complex and ancillary facilities found at Tigné Point). Moreover, on June 5, 2006, a joint venture, Solutions and Infrastructure Services (SIS) Limited, was set up between Midi and Siemens. SIS Limited installs, operates and maintains the building technologies incorporated in the Tigné Point and Manoel Island developments.

This bond is being issued mainly to finance the finalisation of the Tigné Point development. Midi will also utilise €5.37 million from the bond proceeds to partly repay a privately-placed secured bond amounting to €9.32 million which is due for redemption by December 2009. Moreover, the company is in the final stages of negotiating a roll-over for the remaining balance of €3.95 million at a variable interest rate. In the event of over-allotment, the proceeds shall be applied for the further development of Tigné Point or for the reduction of associated borrowings.

Tigné Point is a residential, commercial and leisure development in Sliema comprising 420 residential units (covering just over 50 per cent of the total area) complemented by office area, a shopping mall and Pjazza Tigné which also entails commercial and leisure outlets. All traffic is routed underground, providing a car-free zone at ground floor level and extensive green areas and public spaces. The project places a strong emphasis on the restoration of historic sites including Fort Tigné, St Luke's Garrison Chapel, army barracks and the clock tower. Midi plc has committed €30 million towards the restoration projects on Tigné Point and Manoel Island.

On the other hand, the development at Manoel Island will mainly comprise the construction of a marina village and the restoring of Lazzaretto and Fort Manoel. The Manoel Island project is currently at design stage, with construction scheduled to commence in 2010.

The final development phases at Tigné Point will see Midi focusing on the development of the residential units surrounding the piazza, the completion of the residential units in the block known as T10, the retail mall which will house the internationally renowned department store Debenhams, and the business centre. The retail mall, known as The Point, will include a supermarket, a food court, an open atrium and around 50 outlets in an area of around 17,000 square metres.

This is a unique upmarket development which is reported to continue to experience sustained demand contrary to the trends recorded during the past 12 months at the lower end of the property market. Midi has already sold 235 residential units out of the 260 which it placed on the market since October 2002 with a total sales value of €138 million.

With many investors seeking to improve their returns from lower yielding investments as well as bank deposits, this offering should prove popular and is likely to kickstart a very active year for the local bond market.

Prospective investors should read the prospectus and further marketing material made available by Midi which is available from our website and other investment services providers.

http://www.rfstockbrokers.com

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.

© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.

Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Ltd.