Apparently, some self-declared local financial experts are calling the press to spread panic over the fact that MIDI’s bond-holders may end up with nothing as the company fails to meet its financing requirements and has no capability of repaying its debts and creditors. A Maltese bank that was to finance MIDI’s project at Manoel Island has pulled out its financing following the government’s decision to cancel the land-lease.
MIDI’s financial model was based on heavy debts and financing and the company’s financial health was horrible to begin with even before the government showed any intention of taking over the land-lease. The company didn’t have the cash to fulfill its project and obligations and needed to constantly take on more debt just to pay its previous debt and bond-holders.
I can just imagine who these supposed financial experts are: the same people who told the Maltese public to buy Chinese stocks last October during Europe’s biggest bull market in history, and the others who have been promoting underperforming junk funds to oblivious Maltese clients throughout their careers.
Financial experts: sure. As long as these four fools keep measuring their standards against each other, they will always be an authority. If you measure their performance against the S&P500 that’s a different story. Let’s move on.
That MIDI’s bondholders lose all their money would be the best thing that has ever happened in the history of Maltese finance. It’s not just a good thing: it’s absolutely necessary that they lose all their money. In addition, hopefully, the story of MIDI’s bondholders will be publicised and propagated across the media so that people know and learn about the investors who lost everything investing in MIDI.
Cruel? Not really.
For years on end, Maltese investors have preferred to invest in bonds and “safe” financial instruments avoiding completely stocks of publicly-listed companies, and even private companies. Maltese investment has basically gravitated towards bonds and many of these bonds have been about real-estate projects by major developers, some of which even using public-land. For years on end this predatory industry which has contributed to Malta’s pervasive housing crisis and environmental disaster, has promised easy and safe returns: no more.
With MIDI bondholders losing their money, what’s happening is that the public is being punished for its greed, stupidity, and aversion to invest in anything productive and valuable to our economy that comes with a little risk. The fact that investors are now set to lose their money after investing in a company with a dismal balance sheet, and in a project that was only profitable due to government generosity, is a natural and foreseeable consequence of poor financial judgment.
Finally, and for the first time, investing in rent-seeking monstrosities is no longer profitable. This message should be sent wide and clear to move and change our financial culture once and for all, from one that seeks safety and security in mega real-estate projects to a culture that promotes investments that are healthier for the economy.
Ultimately, the financials of MIDI looked horrible, and financial consultants and advisors who promoted MIDI’s bonds and stock to their clients have no authority whatsoever to go to the press and blame the government for their stupidity. Those who encouraged their clients to buy MIDI’s bonds were doing so assuming that the government was to keep supporting this horrible and nonsensical project: this was an investment based and backed on the government’s guarantee.
If the government ensures that MIDI’s bondholders are bailed out, it would be sending a grave and dangerous message: that reckless financial behaviour will be rewarded. This must not be the case. Investors who bought MIDI’s bonds knowingly took a risk by investing in a financial instrument that was always susceptible to failure. Now that the investment has collapsed, they have only themselves to blame for assuming that a project marred by irregularities, and sustained largely through excessive government support, would never fail.
There’s no crying in the (rent-seeking) casino.
Website Editor
Historian and Publisher
Leave a Reply