The board of directors of Mediterranean Investments Holding plc will call investors to approve a change to the use of bond proceeds, for the partial repayment of a €13.2 million loan taken out by the company to meet creditor payments during the civil war in Libya in 2011.
Bondholders will be convened on 11 June, 2012.
According to the MIH bonds prospectus, up to €31 million of the bond proceeds were to be utilised to fund the company's investment in the Medina Tower Project through its 25% equity interest in the joint venture company.
"Since the projected timelines for the Medina Tower project were revised due to the outbreak of hostilities, the board of directors estimates that part of the company's equity contribution in that project will not be required before mid-2014.
"In view of these revised timelines, the board is proposing that €8 million of the bond proceeds be applied in partial reduction of a loan the company entered into in 2011, to meet the payment of capital creditors during the period of civil war in Libya."
The Medina Tower Project is a mixed-use development in the centre of Tripoli comprising residential and office space together with retail areas within a 200,000 square metres of built up area over 40 floors and an additional four underground floors for car parking.
The MIH board said that following the issue of the bonds in July 2010, the company faced a severely challenging period as a result of the civil war in Libya between February and September 2011.
"The dramatic events that unfolded over that period and the consequent uncertainty led the company to re-consider its priorities, adopting a defensive strategy of protecting its assets in Libya from the risks and perils of war."
The environment in Libya during the protracted civil strife required the company to protect, as far as was practicably possible in a time of war, the company's investment and assets in Libya.
The development of the Medina Tower project was suspended pending the cessation of hostilities, while MIH shifted its focus on the significant impact that the events in Libya inevitably had on the ongoing business and operations at Palm City Residences, a project that constitutes the sole revenue generator for the company.
"With the outbreak of the civil war, operations at Palm City Residences were significantly reduced with tenants evacuating the country and terminating their lease agreements. This has resulted in the financial year 2011 being an acutely difficult and challenging year for the company. Its cash flow was severely strained and to meet its on-going contractual obligations the company had no alternative but to raise a loan totalling €13.2 million," MIH said.
Over the last few months, the sense of stability in Libya has allowed MIH to resume marketing of the units and restart operations at Palm City Residences. Occupancy levels in March 2012 reached 75%, levels that are estimated to reach 90% by July 2012.
(Source: Malta Today)