Refusals from Allianz, Deutsche Bank left Vitals with no choice but to sell

Vitals Global Healthcare, the investors hand-picked by the Labour administration for a hospitals privatisation project, were rebuffed by major credit institutions in their bid to secure finance to take their project forward.

It was only towards the end of November, that VGH had its back to its wall and decided it had no option but to sell out to Steward Health Care, the American private healthcare giant.

Early on in 2017, a planned bond issue with Allianz, the German financial services provider, failed to pick up steam. By then the company was plagued with a lot of negative attention in the press in the runup to the snap elections called in May.

After the election, VGH once again started looking for the millions it needed to take the hospitals project forward.

Towards the end of the year, a possible lifeline appeared in the form of finance from Deutsche Bank. But even here, the capital failed to materialise, leaving VGH stranded.

But the company – whose shareholders include fund manager Mark Pawley and its Canadian director Ram Tumuluri – was early on in 2017 already being targeted for the possible sale of a stake to Steward, which is itself owned by American asset giant Cerberus Capital Management.

One of Steward’s former chief officers, Armin Ernst – who occupied the role of Vitals CEO up until his departure earlier in 2017 – had mooted the possibility of Steward joining VGH as a partner in the project.

A government source who spoke to this newspaper confirmed that Ernst actually suggested the prospect with the government in the summer of 2017, possibly without having informed VGH.

“The government knew then that VGH was finding it problematic to secure finance for the concession, and Steward was ready to step in. But the VGH shareholders were wary, because they knew that Steward would seek a buy-out. They opposed the offer because they did not want to see their shareholding diluted,” the government source said.

It was only towards November, after the ultimate rebuff from Deutsche Bank, that VGH found it had no option but to sell out.

In December, VGH took out a €900,000 loan from Agribank plc. Steward Health Care are now expected to take over the 30-year concession from VGH on Monday.

The hospitals privatisation is now a major subject of controversy after it was revealed that the Labour administration carried out a selection process for such a major privatisation, when it had already signed a memorandum of understanding with the selected company.

Vitals Global Healthcare was created after a group of investors, as well as a group of Pakistani entrepreneurs, secured an MOU from the Maltese government to take over three state hospitals.

Five months before the public request for proposals was issued, the investors behind Bluestone Malta had signed an agreement in November 2014 showing they already knew they would be taking over the Gozo and St Luke’s hospitals.

The four parties declared they would hold an equal 25% share in a special purpose vehicle that would own 70% of the hospitals projects, namely Bluestone Investments Malta. Although the other 30% owner is not specified in the agreement, Bluestone Malta is a 70% shareholder in the Maltese company Crossrange Holdings, together with the company Pivot Holdings, which has a 30% stake. Pivot is owned by Pakistani entrepreneurs Shaukat Ali Chaudry, who has carried out business development work for VGH and lives at Tigné Point in Sliema; and fund specialist Mohammed Shoaib Walajahi Importantly, Crossrange Holdings owns the two companies Gozo International Medicare and Gozo Global Healthcare.

These two companies, created as early as December 2014, were identified in the investors’ agreement as the asset holding company and operations company for Bluestone Malta.

The Maltese government had steadfastly refused to identify the real owners of VGH, and never declared all the beneficial owners of the hospital project beyond Mark Pawley.

At one point, Tumuluri and Shaukat Ali Chaudry were busy seeking a €50 million equity stake for a renewable energy project, in a meeting with a Norwegian company where they boasted of VGH being valued at €2.8 billion.

The government also hid the fact that VGH could use its sole discretion to extend what was believed to be a 30-year concession, for 99 years on the three hospitals.

The only condition was that the government can take back the title over Karin Grech and Gozo hospitals after the 30 years are up, and to do so, it would have to pay VGH €80 million.