Melite Finance plc, the finance company of Melite Retail Limited, on Friday shared that it is seeking financial support after having to terminate lease agreements for a number of its stores in Italy.

In February, Melite Properties Srl, an Italian subsidiary of Melite Retail Limited, had to terminate the agreements with Giadea Srl, a third-party tenant which did not settle rent payments for January 2024 for the 10 stores it leased from Melite Properties. Melite Finance had said that the Italian subsidiary sent multiple requests to Giadea for payment, yet this was to no avail, and Giadea has “abusively retained occupancy of the stores in question.”

Melite Properties holds lease and rental agreements in some of Italy’s most prominent retail areas. It has a property portfolio that has been built up over a 16-year period. Melite Retail was formed in 2015, operating a number of fashion franchises in mainland Europe, including Accessorize, Calvin Klein Underwear, and 3INA Cosmetics brands across Italy. Melite Retail Group’s shareholders are Lidsdale Limited, Alf. Mizzi & Sons Ltd, and MMGH Ltd. Melite Finance is a Maltese company listed on the Malta Stock Exchange.

Melite Properties’ portfolio includes stores in various locations across Bologna, Bolzano, Como, Firenze, Genova, Milan, Padova, Pavia, Torino, Treviso, and Verona.

In the latest announcement, Melite Finance stated that its Board of Directors has decided to convene an Extraordinary General Meeting of the shareholders to be held on 19th April 2024, in order to request financial support for Melite Finance and Melite Properties.

“The outcome of the Extraordinary General Meeting will be reported in a company announcement to be published following conclusion thereof,” Melite Finance added.

Since it terminated the lease agreements, Melita Retail stated that it is taking legal action with a view to recovering possession of the stores in a cost-effective and time-efficient manner, while also safeguarding its interests to receive any unpaid rent. Failing to recover the debt due or face a prolonged delay in recovering possession of the stores, it would have a substantial impact on the company’s financial position.

This is not the first time that Melite Retail has requested financial support, with the business being hit hard by the COVID-19 pandemic, particularly due to lockdown in Italy leading to it shutting down some of its stores and find new tenants for others.

A MaltaToday report from 2020 highlighted how Melite Retail requested bondholders to reduce their bond interest rate of the €9.25 million bond issue, first released in 2019. In fact, the property rights are what constituted the value of the security for the bond issue. Following that, it proceeded to carry out a restructuring plan to preserve the majority of its property rights. During that time, the shareholders of Melita Retail also advanced €1.1 million as part-capital contribution to Melite Properties, repayable once the 2028 bonds are redeemed, as well as a non-interest loan.

This was then followed by Melite Finance having to delay the publication of its unaudited interim financial statements for the financial period ended 30th June 2021. This delay prompted the trading of the aforementioned bonds to be temporarily suspended from September to October 2021. During an Extraordinary General Meeting held in August 2021, the company’s Board of Directors requested the shareholders to consider possibly providing additional support to the company. However, this was rejected, as in the circumstances, the shareholders were not in a position to uphold the request.

In an opinion piece by seasoned accountant Paul Bonello, published by Lovin Malta in 2021, he affirmed that the shareholders behind Melite Finance had given indications that they expect the bondholders to “bail out the ordinary shareholders,” attitude that he had perceived to be “out of place.” He had spoken against the “high-handed attitude” of the shareholders, and that in similar situations abroad, such shareholders would lose all their risk capital and their say in the company.

Fast forward to the present day, the most recent financial statements released for the company were for the six-month period ended 30th June 2023, where the wider Melite Retail Group registered a pre-tax loss of €133,053. The company had affirmed that its future is intrinsically linked to developments in the retail real estate market in Italy. It had also stated that both the retail landscape and the commercial real estate landscape in Northern Italy were subject to “significant and unprecedented disruption as a result of the pandemic.”