While Government authorities and banking institutions devised ways of how to assist businesses weather the COVID storm, Malta Stock Exchange chairman, Joseph Portelli, shed light on why the organisation chose not to offer a blanket moratorium on fees owed by listed companies.

In an MSE newsletter published last Friday, Mr Portelli stressed the importance of the tourism sector to Malta, highlighting that alone, it makes up 15 per cent of GDP and is one of the country’s largest employers.

“Although geographically Malta is half the size of Singapore, and one of the most densely populated countries in the world, it still attracted some 2.7 million tourists in 2019. Therefore, it should be no surprise that leisure and hotel companies make up a bit portion of the close to 90 companies listed on the MSE,” Mr Portelli wrote.

He explained that when COVID-19 hit Malta in early March, the MSE kept its offices open however it asked the majority of staff to work remotely.

“Knowing that many companies listed on the Regulated Main Market and the Prospects MTF would be experiencing logistical issues, potentially causing delays to regulatory filings, the MSE and the MFSA as Regulator and Listing Authority, took immediate steps to extend reporting deadlines.”

He stressed how by end-March, with the airport effectively closed, the local tourism and leisure industry was in “free-fall”.

“Clearly, we felt the MSE should take some action to alleviate the financial stress many of the listed companies were experiencing.”

He remarked that one of the first steps taken was the doubling of the MSE’s payment credit policy from two months to four months.

“We reasoned Maltese companies, particularly those in the leisure space, would appreciate receiving additional time to manage their finances and settle invoices.

“However, we conceded early on that, considering so many leisure and hotel companies were effectively closed for business, extending payment terms would afford little solace to a company experiencing an existential liquidity crunch.”

Mr Portelli remarked that while the MSE was sympathetic to the plight of many companies listed on the exchange, its Board concluded that introducing a moratorium, or discounting listing fees, would “not be an effective remedy”.

“Firstly, we felt the Maltese Government was already taking significant measures to assist companies to alleviate the economic pain caused by the pandemic.

“Considering the MSE is Government owned and we are a neutral and equitable public entity, we are obliged to treat all entities fairly and equally.”

He continued that lowering the listing fees only for those companies most hit by the pandemic would be problematic, “considering all companies would demand equal treatment and lower fees”.

“We would have potentially been in a situation where companies with only minimal economic exposure to the pandemic, with more than enough financial resources to settle invoices, would have experienced a windfall,” he wrote.

Mr Portelli stressed the importance of the MSE maintaining a sound balance sheet.

“More importantly, however, we concluded that discounting fees could weaken our balance sheet an, we believed, it would not have solved companies’ liquidity issues, considering the hardest hit companies would still not be in a position to pay even discounted fees.

“Furthermore, we reasoned, the MSE is a business in its own right and we need to manage our bottom line, as well as cash flows, to ensure we remain viable, liquid and able to mee our own financial obligations. A financially weak stock exchange is the last thing any country needs, particularly as a severe global recession loomed.”

Therefore, after “much analysis, we decided the best course of action would be to waive all late payment fees and create bespoke and reasonable payment plans, even extending into 2021 and beyond, if necessary, to those companies hardest hit by the effects of the pandemic.”

He said that the MSE believed the hardest hit will genuinely appreciate being afforded flexibility and with a long-term payment solution, enabling them to manage their short-term liquidity in a manner conducive to sustaining their businesses.