GlobalCapital bond repayment hinges on new investors’ €15 million injection

Profits that were registered for the first time in seven years by insurance specialist GlobalCapital plc have been punctuated by a warning from auditors Deloitte, who have cast doubts about the company’s ability to continue as a going concern.

The company reported a profit after taxation of €222,671 compared to a loss in 2014 of €3.6 million, which it attributed to an “aggressive transformation strategy” of cost-reduction and disposal of all immoveable property in excess of requirements.

But auditors Deloitte expressed doubts over the company’s plans to finance a bond redemption in 2016 by increasing shareholders’ capital by €15 million, amid plans to bring in Italian bankers EIP plc to take over their parent company’s shareholding.

“The success of these plans, which is fully dependent on funding from external investors, can only be determined at a future date. These circumstances indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern,” Deloitte said in GlobalCapital’s annual report.

GlobalCapital’s €17 million bond issue of 2006 (carrying 5.6% interest) is due for repayment at the latest by 2 June, 2016.

The company intends to finance the bond repayment from the injection of fresh capital through a €15 million rights issue to shareholders.

But the company was rocked in April 2015 by the appointment of conservators for its main shareholder, British American Insurance of Mauritius (BAI), which holds 48.5% of GlobalCapital’s shares.

GlobalCapital’s former chairman, Dawood Rawat, currently based in France, was forced to resign after Mauritian authorities accused him of running a €960 million Ponzi scheme through one of his subsidiaries, the Bramer Banking Corporation. Bramer’s 30,000 deposit accounts were taken over by the State Bank of Mauritius. 

The appointment of the conservator does not relate to GlobalCapital’s operations.

Soon after May, Italian banker Paolo Catalfamo – an honorary consul-general for Mauritius in Italy – announced that his company EIP plc would acquire BAI’s entire shareholding, subject to regulatory approval.

This would see EIP take up its pro-rata share in the planned rights issue, to secure a minimum investment of €14 million. The public offering is expected to be made by January 2016.

EIP plc is a Malta entity registered in May 2014, owned by Catalfamo and Andrea Zitelli, who have a background in investment management, and having issued and paid-up share capital of €750,000.

EIP intends to finance its participation in the €15 million rights issue by raising additional equity “from potential new investors known to EIP” even though to date there are no tangible commitments by third party investors.

But GlobalCapital’s directors said they are also actively considering “other financing options potentially available to the group” in order to honour the bond redemption. “Such options are still under consideration and are commercially sensitive and although their success cannot be presently guaranteed, the Board of Directors is confident that there will be support from the relative stakeholders and other potential investors.”

The directors said in their annual report they have “a reasonable expectation” for adequate resources to continue their operations. “Any judgement about the future is based on information available at the time at which the judgement is made… such judgements cannot be viewed as a guarantee regarding future events or conditions which cannot be predicted.”