Melite secures tenants for COVID-hit stores in Italy

The Maltese franchise holders of the Accessorize brand in Italy have announced they have succeeded in sub-leasing 11 of its stores in the north of Italy impacted hard by the COVID lockdown, to a third party.

Melite Finance said that its stores in the cities of Bolzano, Como, Florence, Padua, Pavia, Milan, Turin and Treviso – previously sub-leased by its subsidiary Melite Properties – will be taken over a third party already operating its own brand across more than 80 stores all over Italy. It will also assume responsibility for the Accessorize franchise in Italy.

Melite also concluded agreements for the subletting of seven other stores to third-party operators unrelated to the Accessorize brand, while one store remains vacant.

The retail franchise chain suffered €4.2 million in losses last year due to the COVID closures of its Italian fashion shops for the Accessorize, Monsoon and CKU brands, and more worryingly saw its projected €6.2 million equity going down to €1.3 million.

The company operated some 26 properties in Italy, but the ravages of COVID-19 across Italy forced the Italian government to introduce a severe lockdown that killed business in the country and forced Melite to rescind its leases on the stores.

In 2019, Melite had 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. But now the group wants bondholders to reduce the bond interest rate from 4.85% to 3.5% as from November 2021.

“The position in Italy, and that of the business, remain subject to a variety of factors which are not within the sphere of control or influence of the company and management, and the impact of which cannot be predicted with a sufficient degree of certainty,” Melite Finance directors said in their latest company statement.

The company still intends convening a meeting for bondholders on a proposal to reduce the coupon on the bond, which Melite says must “reflect the economic realities which the company and subsidiary Melite Properties face and will continue to face.

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

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 of parent company Melita Retail also said they will advance €1.1 million as part-capital contribution to the company (€630,000) that will be repayable at the option of the company after the 2028 bonds are redeemed; and €470,000 in a non-interest loan, repayable within five years.