11/11/22

MALTA: Golden passport fund stops Lombard bid to increase share capital on its own terms.

As published on maltatoday.com.mt, Thursday 10 November, 2022.

Lombard Bank’s board of directors failed to pass a resolution to issue new ordinary shares and increase its share capital, after its chief institutional shareholder – the Maltese posterity fund NDSF – voted against.

The National Development and Social Fund, whose revenues are generated by the sale of Maltese citizenship, holds 49.01% of the bank’s shares since acquiring them in a bid to retain domestic control after the exit of Lombard’s Cypriot shareholders.

But the NDSF said Lombard’s plan to increase share capital, in the process diluting current shareholders’ equity, had not been accompanied by a presentation to shareholders, including the reasons for the issue.

“The NDSF believes the Bank’s board should not have the authorisation to issue and allot shares in the bank up to the authorised share capital of the bank with such rights, restrictions and terms and conditions as the board of directors, in their absolute discretion, deem fit,” said CEO Raymond Ellul.

Although a chief institutional shareholder, the NDSF does not yet have a member on the board of directors.

At an EGM convened by the Lombard directors, the NDSF voted in favour of three resolutions, two of which were for the redenomination of the bank’s 25c shares into 12c5 – a split – so as to redesignate the €20 million authorised share capital from 80 million shares to 160 million ordinary shares.

“As a matter of principle, the NDSF is in favour of the bank strengthening its capital base... both such resolutions presumably were proposed in anticipation of and to facilitate the eventual increase in its capital base,” Ellul said. The NDSF also approved a third resolution to amend the Memorandum and Articles of Association.

“The NDSF’s vote should be interpreted as a vote in the interest of all the bank’s shareholders and as a prudent measure taken to ensure that the correct level of transparency and shareholder participation is observed, and the rights of the bank’s shareholders maintained,” Ellul said.

The NDSF will now want to be present for future discussions with the bank to ensure its proposal for a new share issue be approved by a minimum of 75% of the shareholders to pass.

The NDSF acquired a 49% equity in the private Lombard Bank in 2018. The investment, valued at just over €51 million, was intended to facilitate the exit of the now-defunct Cyprus Popular Bank. The move was a measure to safeguard the domestic position of Lombard Bank, which is the owner of Malta’s major postal service, Maltapost.

The NDSF’s investment was intended to be a temporary one, however, since then the fund has not divested itself of its shareholding.

The NDSF was caught unprepared by the bank’s announcement that it intends to access the capital markets with a share issue.

That much was confirmed in a letter sent by the NDSF to the bank’s management and board of directors, in which it objected to the new share issue and what this would do to the value of the agency’s – effectively government’s – shareholding.

Over 1,200 shareholders, and investment funds, hold the remaining shares in Lombard Bank, which besides the NDSF, include Virtu Holdings (9.89%), LifeStar Insurance (5.59%) and First Gemini p.l.c. (5.31%).

Lombard, which is run by CEO Joseph Said, has a controlling 71.5% stake in Redbox, the owner of postal operator Maltapost plc.