Malta Stock Exchange (MSE) Executive Chairman Joseph Portelli has stated that it is “not viable” for credit ratings to be placed on local investments, due to the costs tied to doing so.
His comments came during the Family Business Forum, an event which was co-hosted by Ganado Advocates and Zampa Debattista earlier this month. The forum saw various professionals and governance specialists come together to discuss different perspectives on how important strong governance is when it comes to establishing value for family businesses.
Mr Portelli was interviewed at the event by Ganado Advocates Managing Partner André Zerafa, and at one point when the discussion was opened to questions from the audience, the MSE Executive Chairman was asked whether there is a way of introducing credit ratings to local companies.
He replied that it is “not viable”, particularly since credit rating agencies are “very expensive”.
Credit rating agencies lay out information to investors about bond and debt instrument issuers, providing assessments about the creditworthiness of such bonds. The three major credit rating agencies are Moody’s, Standard & Poor’s, and Fitch.
“A lot of the bond issues we have on the MSE are already oversubscribed,” he said.
Over the past few months, a number of bond issues listed on the MSE have either been fully subscribed or oversubscribed prior to their planned closing date. These include ones issued by International Hotel Investments, AX Group, United Group, Mediterranean Investments Holding, and The Ona Group, just to name a few.
Mr Portelli remarked that given that most bonds are already garnering enough interest, the introduction of credit rating agencies would lead companies to question why they would need to pay for such services when “many are already knocking on the door for bonds”.
He stressed that instead, industry stakeholders must “take responsibility for their own financial literacy”, not solely relying on these agencies to notice whether or not it is ideal to invest in a company.
Mr Portelli pointed out that MSE has offered a number of courses over the years to help businesses, whether family-owned or not, together with stakeholders, become more financially literate. While these are “very cheap”, he said that there are “largely no locals” enrolled in them.
Image credits: MSE Building / Vassallo Group
