Malta bond defaults: Finance Minister says ‘risk is real’ as local savers lose millions

**‘Defaults are part of the risk’ for bond investors – finance minister**
*By a Hot Malta correspondent*

Valletta – Finance Minister Clyde Caruana has told Maltese retail bondholders that “defaults are part of the risk you take,” after two local companies suspended interest payments this summer, wiping millions off the savings of ordinary families.

Speaking to reporters outside Castille on Tuesday, Caruana rejected calls for a state bailout of the latest issuer to falter—Birkirkara-based construction group Polidano Bros—arguing that “government cannot guarantee every private IOU scribbled on the island.”

The blunt message marks a tonal shift from the paternalistic tone successive administrations have used with the Maltese public, for whom corporate bonds have become the national equivalent of a piggy-bank. Over the past decade, low bank deposit rates and a property-obsessed culture have pushed tens of thousands of pensioners, teachers and even parish priests to park life savings in 4 %–6 % paper sold by construction magnates, catering empires and boutique hotels.

According to Malta Stock Exchange data, retail investors now hold €1.8 billion in unsecured corporate bonds—roughly €3,500 for every man, woman and child on the island. “It’s bigger than the entire cruise-ship sector,” one trader remarked.

### A summer of silence
The crunch began in June, when Eden Leisure Group—promoter of the Isle of MTV festival—skipped a €1.2 million coupon on its €30 million retail bond, citing “cash-flow timing issues”. Weeks later, Polidano Bros followed suit, freezing payments on €24 million of 5.8 % notes that had been marketed in 2021 “to finance equipment for Smart City”.

Neither company has filed audited accounts for 2023, and both have quietly delisted their securities from the official MSE bond list, leaving 4,300 local savers unable to trade.

Retired Gozitan teacher Maria Camilleri, 68, invested €40,000—her entire severance pay—into Eden paper after seeing a glossy brochure at the Victoria branch of BOV. “They had photos of Eden Cinemas packed with teenagers. It felt safe, Maltese, like buying a raffle ticket for your own country,” she said, fighting back tears outside the MSE building in Valletta. “Now the phone just rings.”

### “Risk? What risk?”
Financial literacy surveys consistently rank Malta among the lowest in the EU for understanding credit risk. Until 2019, the country’s financial watchdog did not even require corporate bond prospectuses to carry a “your capital is at risk” warning in Maltese.

The result is a cultural phenomenon: church halls in Żejtun and Mosta host “investment evenings” where issuers hand out pastizzi and rosary beads alongside subscription forms. One broker, who asked not to be named, admitted: “We sell identity, not yield. Tell a pensioner the bond will build a new hotel in Qawra and he’s in—because he took his honeymoon there in 1973.”

### Government walks a tightrope
Caruana’s refusal to intervene pits him against back-bench MPs whose constituencies are dotted with angry constituents. Opposition leader Bernard Grech has demanded a parliamentary inquiry into “predatory selling” by banks and stockbrokers, while Labour MP Silvio Schembri faces a recall petition in his Żurriea district after endorsing the Polidano bond at a 2021 village festa.

Yet the minister is mindful of Brussels’ strict state-aid rules and of Malta’s own 2020 rescue of €250 million in Air Malta bonds, which the EU classified as illegal aid and ordered partially clawed back. “We cannot keep privatising profits and socialising losses,” Caruana said. “Lessons must be learned.”

### Community fallout
In tight-knit villages, the defaults are reverberating beyond balance sheets. The Żabbar parish pastoral council has suspended its elderly day-care programme after the church’s Caritas fund revealed €180,000 exposure to Eden paper. In Għargħur, the band club has cancelled its 2025 feast fireworks, having parked donations in Polidano securities.

Meanwhile, lawyers are preparing Malta’s first class-action suit under the 2023 Investor Protection Act, claiming issuers misrepresented liquidity ratios. “This is not just money,” said attorney Ramona Attard, representing 120 plaintiffs. “It is inter-generational trust. My clients feel betrayed by their own compatriots.”

### Conclusion
For decades, Maltese savers treated corporate bonds like festa souvenirs—colourful, local, reassuring. The summer of skipped coupons has shattered that illusion, forcing families to confront a novel concept: risk. As Caruana warned, the state cannot underwrite every private dream printed on a prospectus. The island’s next lesson will be learning to read the fine print before the pastizzi get cold.