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Matthew Vella
EUR 10 million (Lm4 million) loan from Bank of Valletta for Brindisi Terminal is undergoing major semantic surgery: Opposition Leader Alfred Sant has called it an “investment,” Investments Minister Austin Gatt disagrees and terms it “refinancing,” and the Malta Freeport called it “recapitalisation.” Whichever political dictionary is being used, Brindisi’s linguistic meandering is a confusing piece of political bickering.
Brindisi Terminal Italia (BTI), a joint operation between the Malta Freeport, the Brindisi local council and Italian investment firm Papalini, is not such a nice piece of work. Gross mismanagement at the hands of Brindisi’s managing director Mario Salucci, a Papalini representative; the arrest of Brindisi mayor Giovanni Antonini and others from the local council for corruption, fraud and extortion connected with Brindisi Terminal itself; and an endless amount of debacles at the terminal with EUR 15.6 million in losses have rendered BTI, in laymen’s terms, a failure.
But Sant questions the reason why BTI is still somewhat alive and kicking. After BTI’s operational losses, and so many millions were lost at the hands of Salucci, who effectively embezzled EUR 6 million of BTI’s cash to fund Papalini and the Brindisi football club, of which he is its president, why should Government have kept the operation alive and injected EUR 10 million to keep the wheels turning?
Accusing the government of spreading misinformation, Sant wrote in The Times that “by any measure, it was new investment in Brindisi,” despite “government misinformation” terming it refinancing. Austin Gatt disagreed, saying that the company was given a facility to finance the loans it took from Italian banks.
And yet, at the end of the tunnel of political discontent and semantic discord, Brindisi is simply an investment turned bad, concocted in 1998 by a Labour government and having materialised in 2000 under a Nationalist administration.
Maybe at the outset it looked beneficial for the Freeport to buy out the foreign competition. Brindisi’s Italian flavour however only adds to Malta’s uncanny record to forge unhealthy relationships with bad characters from across the channel, including Chambray’s Roberto Memmo or the Casinò di Venezia’s bothers with organised crime from Italy, to name a few.
Brindisi Terminal itself was hampered by problems because Salucci and Antonini were killing it by funnelling off funds elsewhere and delaying infrastructural works which would have rendered the terminal more competitive. In the case of Antonini, the Italian media reported that he actually threatened Salucci with withholding the concession for BTI to operate the terminal unless he was given a satisfactory payment, read “bribe.”
Questions should be asked, even to former Labour Minister John Attard Montalto, who brokered the deal in the first place: from where do our governments find their business partners? Or is it just smiles and handshakes that seal our “strategic investments”?
Behind the bid to keep BTI operating, it is the government’s hope that it will be able to sell the company to a strategic partner, maybe get its money back once it clears BTI’s debts, and finally wave ‘addio’ to Southern Italy and its woes.
Sant’s hunch is that the government chose to buy 99 per cent of all the shares in BTI instead of declaring it bankrupt at a “delicate time” when it was conducting negotiations to privatise the Malta Freeport, because it had been surprised with an unexpected blunder. Papalini was declared bankrupt in June 2003, and Malta Freeport was faced with the whole repayment of EUR 15 millions in loans from two Italian banks, despite being until then a minority shareholder with 40 per cent of the shares.
Malta Freeport had two options. It could have declared bankruptcy for BTI and face a EUR 26.7 million bill, namely: paying back the Monte dei Paschi di Siena and Meliorbanca loans (over EUR 16 million with interest), taxes and bank exposure (EUR 3.2 million), termination benefits for employees (EUR 1.3 million), and creditors (EUR 6 million).
Instead, it chose to keep the operation going to “handle the exposures at a more manageable rate.” In February 2004, Malta Freeport bought Papalini’s shares for one-tenth of their value, EUR 350,000 instead of EUR 3,579,000, becoming the owner of just over 99 per cent of BTI.
It also made redundant a great number of workers at BTI: Salucci had employed 98 workers without the consent of the board of directors, most of the recruitment done on the eve of the Mayoral elections in Brindisi according to the Investments Ministry, despite the lack of work at the terminal. The original business plan provided for 40 workers. In April 2004, Malta Freeport reduced the number to 17.
Finally, Mimcol stepped in, getting Bank of Valletta to issue a EUR 10 million loan to pay off part of the loans, some of the creditors, and the tax, bank exposure, and termination benefits, to “minimise the damage, attempt to recover some of the loss by selling the terminal to someone else” instead of paying EUR 26.7 million at one go, the Investments Ministry told MaltaToday. Sant’s rueful suspicion is that “Brindisi is so bankrupt that no bank would oblige.”
In comments given to MaltaToday, Sant said that according to the information available from the government, Malta Freeport should have taken the bankruptcy option, “but the suspicion remains that government was committed to greater guarantees,” and reiterates his verdict on Brindisi: throwing good money after bad, pumping Lm4 million into “the failed Brindisi venture” at the same time that the government put up Lm9 million for Dar Malta, and serving to postpone a call on the guarantees. “Millions get committed and spent, while goings on remain blanketed in fog,” Sant’s piece in The Times read.
Not having taken the bankruptcy option, the government has kept its books clean of a severe increase in its public debt at one go, instead choosing to pay off BTI’s liabilities over a stretch of years, possibly turning it into a profitable venture, and selling it off to a strategic partner.
The EUR 10 million is not new investment, Austin Gatt says, but a facility which is being used to fend off debts as they arise. According to his ministry, BTI’s concession to operate the terminal is the “only real value the company has should it be put for sale” and that the need to sell BTI comes from “Government’s will to recover all it can from the expense that this initiative has cost.”
There is certainly more cash to be paid until those loans are paid, and if BTI takes another turn for the worse, more losses are to be incurred. In the end, Brindisi’s failure approached a crossroads. Alfred Sant and Austin Gatt don’t agree on the strategy used to put Brindisi behind. They don’t even agree on the terminology to describe the strategy.
The Maltese taxpayer on the other hand, is lost for words.
matthew@newsworksltd.com
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