Liquidity problems pushed Vitals to seek concession sale

Vitals Global Healthcare ran into liquidity problems and is still negotiating a price for its 30-year hospitals concession to American healthcare giant Steward.

VGH was reported to have sold its concession just 21 months after being granted a concession to run three state hospitals, with government presenting the transfer as a done deal.

But a VGH spokesperson said that no change in ownership had yet taken place. “VGH is presently in negotiations with Steward Healthcare and no change in ownership has taken place… it is presently in negotiations in accordance with the terms of the agreement entered into between the parties.”

MaltaToday has learnt that VGH was seeking a buy-out from Steward after failing to obtain the necessary credit facilities to take its multi-million project forward.

Sources added that in recent months, payments to suppliers had become an issue, with the VGH finance department taking far too long to deal with invoices, leaving suppliers on edge.

Vitals did not confirm what role government played in the agreement for the transfer of the concession. A representative for tourism minister Konrad Mizzi, who is responsible for the state private-public investments arm Projects Malta, oversaw an agreement for the transfer of the concession.

Complicating matters for VGH was the fact that its former CEO Armin Ernst, who left his post in September, had now taken up the position of president of Steward Health Care. The government was aware of talks between VGH and Steward three months before the agreement was announced just before Christmas, with health minister Chris Fearne admitting it was Ernst who had suggested Steward should purchase the 30-year hospitals concession.

Yesterday a VGH spokesperson denied suggestions by MaltaToday that it never intended honouring its obligations at law so that it could sell off the concession to Steward.

“For the past months VGH has worked together with Partners Healthcare towards achieving the healthcare targets enshrined in the concession agreements… VGH remains committed to delivering the concession as agreed with the government of Malta. The negotiations with Steward Health Care were not planned, however, VGH is entertaining these discussions in the interest of the healthcare concession in Malta.”

VGH blames planning delays

VGH also blamed delays in obtaining planning approval as the reason why the company had delivered its milestones late in the day. The spokesperson said that contrary to previous media reports, VGH did not default on any of its obligations as laid down in the concession.

“The concession agreement clearly states that the milestones are subject to the obtainment of construction permits by mid-2016.

“The contract also states that if said permits are not obtained by then, the concessionaire shall not be deemed to be in default of the milestones and the penalties shall not apply.

“This was tied to the government’s original announcement that the development of the hospital sites would not require standard Planning Authority approval and could go through a fast-track approval process. After objections, the decision was reversed, and it then transpired that VGH would need to go through all standard Planning Authority applications and processes. This pushed back the date when the contractors could begin works on the new building.”

Planning approval was finally given on 7 March 2017, and works began on the 17 March 2017. According to the concession contract deposited in the House of Representatives, “for three years from the completion date the concessionaire shall not suffer or allow to suffer the transfer, transmission, allotment, assignment or other dispersion... of its shares or shares of its subsidiaries without the express prior written consent of the GOM (government of Malta).”

The completion date is defined as the date a final completion certificate is issued, confirming that the concession milestones were carried out: all of which are laid down in Schedule 6 of the contract as the milestones for the completion of the work.

The completion milestones were namely a handover plan, a design plan, the Barts campus at the Gozo hospital, 50 additional beds at Karin Grech Hospital, 80 rehabilitation beds at St Luke’s Hospital, the completion of the new Gozo General Hospital and its renovation, and the completion of St Luke’s medical tourism beds.

The contract presented in the House blacked out the penalties that Vitals was supposed to pay in any event of milestone failure.

Oxley disassociates itself

The Opposition has in the past queried the ownership of Vitals, which has no previous experience in healthcare and was set up to take up the 30-year concession to run the Karin Grech, St Luke’s, and Gozo hospitals.

The company is actually owned by multiple companies in the British Virgin Islands – namely Bluestone Special Situations 4 and Asia Harimau – which lead up to Mark Pawley as ultimate beneficial owner, who is the chairman of Leverage Capital Group and joint CEO of Oxley Capital of Singapore.

But yesterday a director of Oxley Capital told MaltaToday that neither Oxley nor any subsidiary had any involvement or interest in Vitals Global Healthcare, in Malta or elsewhere. “Mr Pawley is the only person associated with Oxley who is involved with VGH’s activities in Malta. No Oxley group entity has any equity interest or expects any monetary benefit from any of VGH’s activities in Malta or elsewhere. Moreover, neither Oxley Capital nor any of its subsidiaries have any interest to establish a foothold in Malta.”