Maldives award to erase $300 mn debt of GMR: Sidharath Kapur

GMR Group today said it has won an international arbitration against the Maldives government and has been awarded USD 270 million as compensation from the island nation after its contract to build an international airport in Male was arbitrary cancelled. GMR Infrastructure, which owned GMR Male International Airport (GMIAL), said the arbitration award was given by a three-member international arbitral tribunal.

Speaking to CNBC-TV18 Sidharath Kapur, President  Finance & Business Development of GMR Airports said that the award of money has come after a lot of struggle from the company’s side.

The original claim was for about USD 500 million and against that the award has come at USD 270 million, he said, adding that he is happy with the outcome.He also said that this USD 270 million will cover the entire debt and equity of the company along with 17 percent returns. In terms of the total debt at the GMR Group, about USD 300 million will get erased thanks to this award.Below is the verbatim transcript of Sidharath Kapur’s interview to Sumaira Abidi and Nigel D'Souza on CNBC-TV18.Sumaira: Can you tell us of this Rs 1,800 crore that you will receive by way of compensation, is this the amount that you were claiming and when are you likely to receive it?A: Definitely it brings a lot of cheers for us at GMR. It is almost a process of almost four years. One was of course the legal process when we were in arbitration which took almost four years and there were three interim decisions and one final decision after which this final award has come. Plus of course there has been lot of other discussions and struggle from our side. We went to even the chairman of IFC Washington we went to the World Bank chairman because they were involved in the bidding process and plus of course working with the Indian government. So, it has been a long struggle and it has vindicated our stand that in terms of corporate governance, in terms of ability to effectively and efficiency manage airports in the global arena as well as ensuring that as a global airport developer our reputation is untainted and comes out very clean.Having said that what I would like to say is that the original claim, of course the last one which we claimed was about USD 500 million and against that the award has come at about USD 270 million. So, there have been of course some reductions from the arbitration panels. They have of course allowed interests at much lower cost of 7.5 percent against 17 percent what we were claiming and also the claims of the Engineering, Procurement, and Construction (EPC) contractors have not been fully given. So, that is where some of the big differences have come. But having said that we are quite happy with the outcome of the award.Nigel: You are talking about USD 270 million, by when will you get this particular amount, could you fill us in on that detail and also what was the amount you have totally invested in this, could you give us that number, what was the total investment that was made, and break that up for us how much of that debt?A: The award has just come. So, we will of course have discussions with the government of Maldives as to the timelines of payments.Nigel: Give us some numbers, do you believe that you will get it in the next six months, in a year, what looks realistic?A: We will definitely get it in the short term. I would want to make this submission that - what is currently a dispute has become a debt outstanding under a contract by the government of Maldives. So, effectively no sovereign government would want a debt remaining outstanding like this. It affects their international credit rating, it affects their international reputation. So, it has moved from the position which was there earlier as a dispute to now a crystallised amount of debt. So, I believe that we should be getting in the near term, maybe in the next few months. It would be very difficult at this point to hazard a guess as to or pinpoint an exact timeline.Sumaira: In hindsight can you tell us what is the amount that you had invested and how much of it was debt that you had taken on and what will this Rs 1,800 crore now do to your debt, because we understand some portion of it would also be payable to Axis Bank?A: Total USD 270 million is covering the entire debt amount, it is covering the entire equity along with 17 percent returns plus all our expenses, termination costs etc. So, effectively there is a return on equity of about USD 47 million. Barring that everything else was really invested in the project. So, USD 47 million is the upside which has come out of this claim and outcome of this claim. In terms of the total debt which will get reduced at the GMR Group that would be about USD 300 million because not only there was some debt which was there in the SPV of Maldives but after this amount became disputed and went into arbitration the group had to take additional debt to backstop that debt. So, both those debts are getting cleared off. So, effectively about USD 300 million debt will get erased at GMR Infra.Nigel: Could you tell us Axis Bank what was their part of this entire debt because it will bring some relief as well?A: Oh yes, I would really like to place on record the strong support which has been provided by Axis Bank in this and they have truly held the umbrella when it was raining for us and the total debt outstanding which they gave originally was about USD 137 million and of course we have cleared off some part of the debt which will get paid to us as part of this compensation. So, net about USD 120 million will be paid to Axis Bank plus of course the interest and other expenses.