The government has ended negotiations with Paul Abela, the owner of a 65-year concession for the former Malta Shipbuilding.

These negotiations were primarily focused on finding a way to save a €15 million bond that Abela’s company, Malta Maritime Hub, seems unable to repay next year.

The termination of these talks now heightens the risk of default, which would mark a first in Malta’s small bond market.

In a recent company announcement, Malta Maritime Hub plc, the bondholder, stated that “discussions between the Guarantor (MMH Holdings Limited) and the Grantor of the Mediterranean Maritime Hub, INDIS Malta Limited, will not be continuing. As a result, the emphyteutical grant for the Mediterranean Maritime Hub will not be terminated early.”

The company stressed that “the Guarantor (Paul Abela’s company) continues to take active steps to ensure that all commercial and financial obligations of the company and the group are honoured in full.”

However, The Shift has learned that Abela and his company do not seem to be in a financial position to meet their debt obligations.

This is confirmed in MMH’s latest published accounts for 2023, where auditors PwC expressed doubt about the company’s ability to continue operating in the near future.

Auditors warn alternative financing will be required for the redemption of the €15 million bond.

“A material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern,” the auditors added.

Sources informed The Shift that negotiations between the government and Abela occurred over several months. The aim was for the government to reclaim the concession and compensate Abela with an agreed amount that would cover his long-term investment and goodwill. This arrangement would have provided Abela with a much-needed cash injection to repay his debts.

Sources confirmed that Abela requested a payment of between €45 and €50 million to let go of the concession, considerably more than the investment he claimed to have made.

As a result, the government has decided to terminate the negotiations, insisting that it could not possibly justify a bailout.

Abela now has a few more months to find investors to join him and cover his debts, although this appears to be difficult within the concession’s current framework.

Meanwhile, Abela moves to Spain

In 2016, Malta Shipbuilding’s premises were transferred through a 65-year concession to MMH Holdings Ltd.

The company is controlled by Paul Abela, a Gozitan better known for his company Elesolar, among other ventures.

The concession was not approved through the standard parliamentary resolution process, which is typically used for public concessions.

Instead, a contract was signed between Abela and the government, and the terms of this concession were never made public.

Furthermore, no information regarding any due diligence conducted on Abela, his businesses, or the company’s financial status has ever been disclosed.

Initially, the MMH company planned to use the former shipbuilding site, which includes a dock, for the oil and gas industry. Yet, the company struggled to attract significant business.

MMH was expected to invest around €55 million in the facility during the first ten years of the concession.

Instead of adhering to the concession’s terms, Abela began using the site for various other purposes, including the storage and repair of yachts and pleasure boats and hosting conferences.

The government chose to overlook this and allowed Abela to operate according to his own preferences, which frustrated competitors like the Manoel Island Yacht Yard, which filed complaints.

Abela’s company continued to experience negative growth, and its auditors warned that MMH was facing a bleak future. Meanwhile, Abela has relocated to a luxury villa in southern Spain, although he continues to visit Malta occasionally.

Attempts for alternative financing fail

In 2023, MMH announced that it was taking steps to strengthen its financial position by entering talks and reaching a provisional agreement with two major Maltese firms: Virtu Ferries, which operates catamaran services to Sicily, Francis Busuttil & Sons Ltd, and Foster Clarks.

The agreement involved transferring 70% of the company to these firms and allowing them to take over the concession.

The two companies requested changes to the original concession, which would enable them to explore new business areas that were not permitted under the original concession agreement with the government.

After months of discussions, MMH announced that negotiations had failed. The second attempt to resolve the issue with the government has now also failed.

In addition to his involvement in MMH, Abela is a shareholder in Elesolar Company Ltd and Elesolar Holdings Company Ltd. He also serves as a director of Abel Energy Ltd and Mainti Sea Support Ltd, where his family holds a shareholding interest.

While Abela remains the chairman of MMH Finance PLC (the bondholder), control of MMH Holdings, which operates the shipbuilding site, is in the hands of his children: Angelique, Luisa and Paul Abela Jr.