Reflections on the bond market

Analysis of Recent Bond Offering by Hili Finance Company plc and Implications for the Maltese Investment Community

Maltese Investment Community Shows Strong Preference for Bonds

The Maltese investment community once again demonstrated its strong preference for bonds in the recent offering by Hili Finance Company plc. The company successfully raised over €102 million for its €80 million five-year offering, showcasing the continued demand for quality bond issuances.

An analysis of the results of the bond issue revealed a lower-than-usual take-up (67%) by existing holders of the 5.1% 1923 Investments plc bond, another subsidiary of Hili Ventures. This lower take-up was attributed to the early closure of the offering on June 19, well ahead of the originally scheduled closing date of July 10.

The overwhelming demand for this latest bond issue highlights the insatiable appetite of the investing community for reputable names. The mobilization of excess liquidity in the banking system into the capital market, particularly into bonds and fixed income instruments, is a trend that is clearly gaining momentum.

The financial strength of the Hili Ventures Group, as highlighted in recent articles, played a significant role in driving the strong demand for the bond offering. With anticipated continued growth in EBITDA, the group’s net debt to EBITDA multiple is expected to improve over the coming years, further bolstering investor confidence.

While Hili Ventures is now among the largest bond issuers in Malta, with total corporate bond issuance exceeding €350 million, the group’s strong financial projections indicate its ability to repay all its debt obligations by 2029. This underscores the importance of assessing the financial strength of bond issuers beyond just the presence of debt on their balance sheets.

Despite the fact that Maltese corporate bond issuers are not rated by credit rating agencies, it is important to note that not all local bonds are highly risky. Several companies, including Hili Ventures and its subsidiaries, exhibit strong credit metrics, indicating a low probability of default and offering a relatively safe investment option for investors.

As the investing community evaluates various bond offerings in the market, it is crucial to consider the overall financial strength of issuers, rather than solely focusing on the security attached to the bonds or the coupon rates. Understanding the ongoing profitability and financial stability of a company is essential in ensuring that it can meet its debt obligations in the long run.

In conclusion, while there are many reputable companies offering bonds to investors in Malta, there are also those with poor metrics that warrant caution. Investors are advised to remain vigilant and thoroughly assess the financial health of companies before making investment decisions to mitigate risks and maximize returns.