Malta franchisers place Italy company in voluntary administration

An Italian subsidiary of the Melite retail group has entered into voluntary administration in a bid to restructure debts incurred after the COVID-19 lockdown in Italy hit hard its 26 retail fashion stores.

Melite Italia is the sub-lessee of 21 out of 26 stores owned by Melite Properties Srl.

Melite Properties is now seeking new tenants for its stores, a process that is dampened by the imposition of a second lockdown in Italy.

“Management’s expectation is that, until such time as the outcome of the Christmas period and the rate of distribution of approved COVID-19 vaccines become clear, it is unlikely that Melite Properties will be successful in sub-leasing further stores at the frequency that had been previously anticipated by management.”

A spike in COVID-19 cases across Italy forced the Italian government to introduce a series of restrictive measures as from early November. “Retail activity was intermittent across most regions of Italy, particularly in the regions in which Melite Properties’ tenants operate,” the group’s finance vehicle Melite Finance reported.

The Melite group reported €3.5 million in losses in the first six months of 2020, as its Accessorize, Monsoon and CKU retail outlets were forced shut by the COVID-19 pandemic in Italy. Even more worrying, its capital and reserves have dwindled from €6 million to a mere €2.2 million.

The company secured €449,000 from the Malta Development Bank’s Covid Guarantee Scheme to meet its interest payments for its €9.25 million bonds. The Melite shareholders will extend a €1.1 million loan to the company, but it had yet to achieve bondholders’ approval to accept lower returns on their investment.

The shareholders – arguably among Malta’s most powerful businesses groups with Alf. Mizzi, Marina Milling, and the Ganado family – have not proposed increasing their share capital.

In 2019, the group issued a €9.25 million bond to finance a restructuring of the group, whose principal activity is the acquisition and sub-leasing of property rights for Italian retail outlets. The group wants bondholders to reduce the bond interest rate from 4.85% to 3.5% as from November 2021.

Besides the forced closure of stores, the Italian government-imposed curfews at night and restricted movement during the day and across towns and regions. Within areas designated as red zones, individuals were and still are only permitted to leave the confines of their homes in very limited circumstances, such as for essentials, health or emergency reasons, with catering establishments and non-essential shops, including retail outlets, being forced shut.