2015 has been a strange year for Global Capital. In April, its majority shareholder went up in a puff of scandal, and in August, its auditors warned that there was a “material uncertainty” about its ability to continue as a going concern.
What a difference a few months make. The interim results were positive and a ‘knight in shining armour’ has turned up with money to invest – and a bulging address book of potential clients.
Paolo Catalfamo’s company, EIP, may have only bought an 8.93 per cent shareholding in Global Capital, but that was enough in the circumstances to get him the chairmanship of the board, and to let him appoint the majority of its directors.
His involvement was supposed to be quite different. Over 18 months ago, the serial entrepreneur had been eyeing the UK as a location for expansion but he heard about Global Capital as a possible acquisition. It was a pleasant surprise to find that the majority shareholding was held by BAI in Mauritius as he was Italy’s consul there and was able to follow up the lead.
When he met BAI’s owner Dawood Rawat in Malta in March 2014, he faced an uphill struggle to persuade him to sell but, in May 2014, he went ahead and made an offer. It never took root. Undeterred, Prof. Catalfamo decided he liked what he had seen in Malta and set up other interests here, but in April 2015, when BAI was embroiled in a massive scandal, he made another offer for the 48.45 per cent shareholding it holds. It seemed to have been ‘in the bag’ once a Share Purchase Agreement was signed but it was not as easy as that. The deal got caught up in a political storm in Mauritius and has not materialised. He said it was unlikely that BAI would sell to EIP or to anyone else for the foreseeable future.
For Global Capital, this was a real set back as it was in dire need of recapitalisation, both in order to repay €13.8 million outstanding bond that was maturing in 2016, as well as to meet Solvency II capital requirements at a Group level. Prof. Catalfamo’s determination to find another way into the company got him thinking outside the box and in the end, EIP bought the 8.93 per cent shareholding held by Aberdeen Asset Management.
I went to the annual general meeting and I realised how many hundreds of small investors there are who had put their savings into Global Capital. I promised myself that nothing bad should happen to them
“I went to the annual general meeting and I realised how many hundreds of small investors there are who had put their savings into Global Capital. I promised myself that nothing bad should happen to them,” he said.
Through his company, EIP, he provided reassurance of his commitment to put up to €15 million into Global Capital, enough to help it meet its immediate recapitalisation needs – but he would clearly like to hold more shares than he currently does.
“My intention is to grow the company and any new shares will be issued equally.”
Growing the company is no small challenge considering that Global Capital had not made a profit for over six years – starting with a €6 million loss from the markets in 2008. His job has been made that much easier by Reuben Zammit, who has put his seven years’ experience within the company to good use since he was made chief executive officer in June 2014.
“In six months,” Mr Zammit said, referring to the profit of €223,000 announced for year ending December 2014, after accumulated losses of €18.6 million in the past four years, “we managed to achieve what the board thought would take two years.”
Prof. Catalfamo brings various factors with him beside deep pockets. A finance professor at the Villanova School of Business, the prestigious university in Philadelphia, he already owns several companies and has extensive contacts built up over his three decades in the sector, as well as the courage to call a spade a spade.
It was very reassuring for the team of 55 that many of the things within Global Capital he identified as being wrong were already being tackled by Mr Zammit.
One of them was the €20.4 million property portfolio, which included a multimillion euro baronial castle in Collalto Sabino outside Rome, and property in Croatia, both of which are still up for sale, four units in Bulgaria which had been sold, and a small place in Barcelona.
The 15-bedroom castle is unique – meaning it is not easy to sell – so Global Capital is now looking at ways to monetise its potential, perhaps by renting it to a management company that already handles similar properties.
“Perhaps at the time that Global Capital bought it, they wanted to diversify but certainly now, with the EU directives on insurance, property investment would be precluded. So, what can we do with it? It could be run as a small hotel, offering a mediaeval experience,” Prof. Catalfamo shrugged.
“The intention was to use it for events like weddings and conferences but the market is very limited as the place is so big!”
Property is not our core business and it is not something that we have a background in. We are scaling down and we will sell whenever we find the right price
Global Capital also had properties in seven sites in Malta, and although these are all rented out and provide income, Prof. Catalfamo believes that this is a right time to sell as the market is so buoyant.
“Property is not our core business and it is not something that we have a background in. We are scaling down and we will sell whenever we find the right price,” Mr Zammit added.
That leaves life and health insurance, and investments. The former are part of the British American legacy, which eventually led to a merger with Global Financial Services Group Plc in 2003.
Nevertheless, this and investments are likely to be the main revenue streams, and it will now be up to the new board to decide on the way forward – most likely by offering these services overseas using passporting rights.
“We will create new products to be offered through a new company with the appropriate licence, and offer individual account management and management of unit-linked policies – under the umbrella of the life insurance company, so there will be more integration,” Prof. Catalfamo explained.
“The timing is right. Clients are wary of being associated with Switzerland as the implication is that they want to evade or avoid taxes. Some of them are going to Dubai – but since this is not regulated, Malta is becoming the new ‘place to be’. And very quickly.”
Does that mean he will also try to get a banking licence, long a dream for Global Capital?
“In my experience, everyone wants to own ships and banks. It is the fantasy of every entrepreneur. For the moment we will concentrate on what we are doing.”