BOV chairman says resignation is not on the cards

Updated at 4:19pm

Bank of Valletta today announced a €14.5 million conditional offer to acquire the eligible shares held by investors in the La Valette Multi Manager Property Fund, for a consideration of €0.75 per qualifying share.

The offer was made as part of a "non-confrontational and expeditious closure" to the judicial protests filed by over 200 investors who held the bank responsible for the way the property fund, once valued in excess of €84 million, was depleted to some €24 million in 2009. The fund was managed by the bank’s investment arm Valletta Fund Management, which invested the cash in global real estate funds. It was portrayed as ‘a low-risk fund with low volatility’, giving good returns even when bonds or equities do badly.

BOV chairman Roderick Chalmers, who defended his bank's handling of the fund fiasco when it first hit the headlines in August 2010, said his resignation was not on the cards. Questioned over speculation of his resignation after being appointed to the Air Malta board last week, Chalmers said he was “very interested to read the speculation... it's news to me as much as it's news to you," he told a journalist.

He would not confirm or deny that he was stepping down, and that the decision would be taken "later on this year... Every year in autumn two decisions need to be taken, one of which is whether Roderick Chalmers will continue to remain chairman of Bank of Valletta."
 
He said that since 2007, being the chairman has not been “a walk in the park”. “It is a very onerous and burdensome position with great responsibility that I was very happy to shoulder, but each year I ask myself the question whether I wish, and am I prepared, to do one more year,” he said.

“I have to have that conversation with myself, so to speak, and the minister has to have a similar conversation with himself whether he wants to appoint Roderick Chalmers as the chairman of the bank of Valletta for one more year... if both these conversations come to a similar conclusion, he gets reappointed for a year. If one of them differs, you’ll see someone else here.”
 
“I’ll have that conversation with myself in autumn. I couldn’t possibly tell you now what that conclusion will be, or even what the conclusion of the minister’s thoughts might be,” he said.

BOV's compensation offer comes in the wake of an MFSA investigation which has yet to be published by the regulator. The bank said that full details of the offer will be set out in a document and accompanying explanatory letter, which should reach each investor over the next few days. The offer shall remain subject to acceptance for a period of 30 days.

“This Offer is being made in an attempt by Bank of Valletta p.l.c. to reach a  of those issues which have in recent months become the subject of judicial protests and an ongoing investigation by the MFSA,” Chalmers said.

“This approach, however, is being pursued by BOV without prejudice to its rights, remedies and defences at law in respect of the said issues, and without admission by itself or any of the members of the Bank of Valletta Group of liability, fault or inability to contest fully the unfounded allegations which have been levelled at it in recent months.

“This constitutes a bona fide effort by Bank of Valletta plc to provide all eligible investors with an opportunity to settle matters that are in dispute in a fair, equitable and expeditious manner,” Chalmers said.

The gross cost of the offer, before any recoveries from third parties, in the event that the offer were to be accepted by all eligible investors is estimated at €14.5 million, and will be taken as a charge against profits before taxation in the second half of Financial Year 2011.

The investors claimed the bank breached its own investment rules when it allowed La Vallette to invest their money in the property fund’s nine underlying funds. Specifically, they accuse the directors of breaching conditions in VFM’s offering document, that restricted it from investing in funds whose liabilities were higher than their net asset value.

The property fund’s massive losses were in part blamed on the vicissitudes of the Jersey-based Belgravia group, which was placed under criminal investigation in 2008. The investors said BOV – as custodian of the fund – failed to keep them informed of what was happening to Belgravia group when it published its 2006 accounts in January 2008.

A €17 million investment in the Belgravia European Property Fund lost in excess of 90% and is today estimated at €1.3m, while other investments originally valued at some €47 million have fallen to €18.5 million.

BOV had said the fund was adversely affected by the negative performance of the property markets and by other factors, and that VFM had been proactive in taking measures to ensure that the interests of the shareholders of the fund were fully protected.

Earlier in 2010 at its AGM, the bank expressed its ‘regret’ at the poor performance of the fund. “BOV greatly regrets the poor performance of the fund and the impact this has had on our investors. We respect the right of any party to take commercial issue and we will always cooperate fully with the MFSA on the inquiry,” chairman Roderick Chalmers had said.

Additional reporting by Nestor Laiviera