Fairfax to raise $150 million in public offering from Canada

It is going to invest $350 million jointly with OMERS

Prem Watsa-led Fairfax’s purchase of GVK Power & Infrastructure’s 33 per cent stake in Bengaluru International Airport (BIAL), the company that runs the city’s airport, has got stuck due to regulatory issues. Fairfax on Friday said it could not complete the Rs 2,149-crore transaction within its committed timeframe as the deal was stuck for want of necessary approvals. 

The delay will also affect GVK’s debt reduction plan. The company was planning to reduce around Rs 2,000 crore of debt. The development comes at a time reports stated that Prime Minister Narendra Modi was expected to review the status of the Fairfax investment in BIAL.

The Canadian investment firm, in March 2016, had said it would buy a 33-per cent stake from GVK Power & Infrastructure in BIAL for Rs 2,149 crore, which wanted to sell assets to pare debt. 

In an update on Friday, Fairfax India Holdings said “Certain of the conditions to closing remain outstanding and there is no certainty as to if or when such conditions, consents and approvals will be satisfied or waived.”

The consents and approvals include transaction approvals from the board of directors of BIAL, certain lenders of BIAL and certain government authorities; obtaining security clearance from the Ministry of Civil Aviation regarding certain subsidiaries of the company, and finalising certain lending arrangements between the company and its lenders, among others.

“Given the continued delays and impediments to closing associated with the BIAL transaction and management’s current uncertainty in respect of whether such conditions will be satisfied, management is unable to establish with any reasonable degree of confidence the timing with respect to closing of the BIAL transaction or the likelihood of the transaction closing,” it added.

According to latest reports, the PM is poised to review the deal status, as the deal is stuck awaiting an approval from Ministry of Civil Aviation.

For GVK, the deal has been expected to reduce its debt by Rs 2,000 crore and save on Rs 300 crore of interest payments in a year with the transaction.

GVK Airport Developers, a wholly owned subsidiary of GVK Power & Infrastructure, which also runs the Mumbai international airport, has Rs 3,500-crore debt and had started the process of paring it.

BIAL, claimed to be India’s first greenfield airport developed under the public-private partnership framework, handled traffic of 18.1 million passengers and 147,467 metric tonnes of cargo in 2015-16. 

Fairfax India Holdings Corporation, an investment holding company publicly traded on the Toronto Stock Exchange, filed a prospectus with the securities regulatory authorities in Canada for a public offering to raise $150 million. Along with the public offering, Fairfax Financial Holdings and OMERS, the pension fund for Ontario’s municipal employees, together will invest $350 million acquiring subordinate voting shares in a public placement. Fairfax India is planning to use the net proceeds of the offerings to acquire additional investments in India.