FIMBank wins battle for London trade financier

FIMBank was celebrating its acquisition of the prestigious trade financier London Forfaiting yesterday after the British company Resurge bowed out of the bid battle.

The acquisition puts FIMBank as one of the global leaders in trade finance business.

"It is super for the bank and super for Malta as well," Margrith Lutschg-Emmenegger, FIMBank executive vice-president told a news conference.

She said FIMBank intended to restructure LFC, which has been making losses, and expected it to reach break-even point by the end of the year. LFC will be delisted from the London Stock Exchange but continue to trade under its name as a subsidiary of FIMBank. A substantial portion of administrative work and control is to be transferred to Malta and administration costs and staff levels will be substantially reduced. Offices which are not strategically important will be closed.

FIMBank director Francis Vassallo explained that LFC's losses were cost related, not trading losses, and it was thus easier for FIMBank to carry out the restructuring exercise.

The acquisition means that FIMBank has achieved in five weeks a global position and a range of services which, in terms of its business plan, it had hoped to achieve in five years. To date FIMBank had been best known for its financing of the ship scrapping business, although it carried out limited forfaiting business.

Forfaiting allows an exporter to grant attractive credit terms to foreign buyers without tying up cash flow or assuming the risks of possible late payment or default. Simultaneously the exporter is fully protected against interest and/or currency rates moving unfavourably during the credit period.

London Forfaiting has offices in London, Russia, Turkey, the US and Brazil, among others.

The Maltese-based bank had announced its £31 million all cash offer for LFC on July 22 and the LFC board had unanimously recommended its approval. The bid had been conditional on FIMBank acquiring at least 90 per cent of the LFC shares.

The battle was joined on August 15 when Jonathan Rowland, who has a reputation of being a corporate raider in the UK, announced a rival £39 million bid by offering LFC shareholders shares in his investment company Resurge.

By that time FIMBank had already received acceptances equivalent to 64 per cent of the LFC shareholding, and although that number rose by only one per cent up to last Thursday, the bank declared its offer unconditional after having amended its financing arrangements.

Ms Lutschg-Emmenegger said that Bank of America, which is financing the deal, compromised by agreeing to back the deal at 75 per cent of shareholders' acceptances and Kuwaiti interests agreed to provide a bridge loan for the remainder so that FIMBank could proceed at 65 per cent.

However she expected that many more LFC shareholders would now accept the FIMBank offer and the new financing arrangements would not be needed.

FIMBank in announcing its unconditional offer in London on Thursday had pointed out to the LFC shareholders that it still intended to de-list London Forfaiting from the London Stock Exchange. "De-listing would significantly reduce the liquidity and marketability of any London Forfaiting Shares not assented to the offer."

A spokesman for Resurge yesterday told the British press: "We are disappointed about what has happend, as we felt that the FIMBank offer undervalued the business, but we wish them luck with what is clearly a good business."

The transfer to FIMBank is expected to take place on Monday.

Mr Vassallo, who is a former Governor of the Central Bank of Malta, observed that this was the first time that a Maltese bank was buying an international, quoted company, whereas to date Maltese institutions were at the receiving end of being purchased.