After losing with the largest margin since 1955, Bernard Grech has now achieved another record. He became the first leader of a Maltese political party to declare that he will not be able to carry out a future election campaign because the party does not have sufficient finances. So much so that he put in question the very continuation of the party he leads.
In 2015, the Nationalist Party’s public accounts showed that it had debts of €7.5 million. Of these almost a million were unpaid taxes, and more than half a million were payments owed to third parties or firms. Around four million were debts to banks with hypothecs on Party properties. These loans must be repaid in 2024 and 2025.
In 2015 the Nationalist Party had properties worth €13.9 million, and deposits with banks of just under a million euro. But Medialink had negative assets of €8.5 million. That is, already in 2015, the Party’s assets and debts were very close in level to each other.
By 2018, the Nationalist Party’s public accounts showed that debts had risen to almost €10 million. The Party’s assets had risen to €14.6 million in property and deposits to €1.8 million. Medialink however had negative assets of €13.4 million.
This means that over a three-year period the Party had seen its debt increase by €2.5 million, while Medialink’s negative equity had worsened by €4.9 million. A total deterioration of €7.4 million. This meant that because the assets had increased significantly less than the debts, the Party had now ended up with fewer assets than it had financial obligations. Loans increased by five times the increase in assets.
Bernard Grech has revealed that the total debt of the Nationalist Party has risen to €32 million. If one assumes that this includes the negative equity of Medialink, it appears that over a three-year period, between 2018 and 2021, debt went up by almost €9 million. This means that the increase in debt accelerated and was almost 20% stronger than that observed in the previous three years. Meanwhile there has been talk that the debt figure mentioned by Bernard Grech does not include €8 million in ċedoli agreements. This would mean that in the last three years the increase in debt was a whopping €17 million, or double that in the previous three years.
In the last three years the increase in debt was a whopping €17 million.
Already in 2018 if the Party paid its obligations to third parties, it would have ended up with very little liquidity. This would have left no money to pay off debts with the Party’s banks. To allow the Party to cover debt deadlines it had two alternatives. One was to continue borrowing. The other was to sell off properties. It appears that Adrian Delia opted for an even more difficult approach – that of trying to address the underlying financial deficit of the party and Medialink.
What little progress was made was immediately squandered by Bernard Grech. Surrounded by the same consultants who had led Simon Busuttil to balloon the Party’s debt, Grech apparently went on a spending spree especially during the election campaign.
As a result, the Party is now in a financial quandary. It has important debt deadlines coming up. The loans with the banks cannot be deferred, or else the banks will seize the properties that serve as collateral. The only breathing space available for the Party is to somehow convince those who had lent it money via the ċedoli scheme to accept to turn it into a donation or else extend the loan for further years.
However, such an option would be hard to sell, and would also make people wary of partaking in new issues of ċedoli. Therefore, the Party is likely to have to resort to selling close to a quarter of its properties to make sure it can repay its bank loans and service for a while the ċedoli.
Those few who laboured hard to bring the Party back to financial sustainability have made it clear that they are now out of the picture. They believe that since the establishment was so keen to throw out Adrian Delia, it is the turn of this faction now to turn the Party around. This is another reason why none of the Delia faction is going to challenge Bernard Grech.
But at the same time there are already several Nationalists who are unwilling to accept Grech’s proposed solution to sell Party property or run down Medialink. They are pointing their finger at the spectacular cost incurred in the election campaign. They are asking why when Grech knew that the Party has so much debt, he still spent so many millions in the campaign. Others ask why Grech was willing to spend so much in wages and consultancies, reversing the consolidation of finances that had started under the previous Leader.
Be it as it may, the reality is that come 2024, the Nationalist Party’s main concern will likely not be the MEP election but whether it will be able to repay its first due bank loan and whether its repayment of ċedoli would have been postponed by another decade.
This post gives me the shivers!!