PSP, ADIA and NIIF breached airport agreement, says GVK group

The move led arbitral tribunal to vacate the order of injunction that had restrained Bidvest and ACSA from selling their shares to any third party, firm says in response to legal notice

Several conditions in the agreement with PSP of Canada, Abu Dhabi Investment Authority (ADIA) and National Investment and Infrastructure Fund (NIIF) were not implementable and led to the airport sale deal with the GVK group to collapse. 

Besides, the three investors had written to the central government and lenders. This did not go down well with the brass of the GVK group.

On August 17, GVK said it had issued a ‘no objection’ to the three investors solely on the basis that they would be conveying to the government their decision to withdraw from the transaction due to the recent developments.

“However, it appears that your clients (PSP, ASIA, NIIF) have instead made unauthorised disclosures and suggestions in the letter. Your letter dated August 27, 2020, goes one step ahead and directly makes misleading statements to our lenders. The three investors are well aware that their acts could not only prejudice the process initiated by our lenders at GVK Airport Developers (GVKADL) and other group entities but jeopardise Mumbai International Airport (MIAL) debt resolution,” the GVK group said on Monday.

An alternative investment plan proposed by the three investors which entailed investment in Mumbai airport directly instead of investing in GVK’s holding company was rejected by the GVK group.

In its communication to the three investors, the GVK group further said funds, which were kept in an escrow account, were also unilaterally withdrawn by the investors, without any permission from the arbitral tribunal.

This withdrawal led the arbitral tribunal to vacate the order of injunction that had restrained Bidvest and consequently ACSA (Airport Company of South Africa) from selling their shares. 

With this, the investors themselves allowed Bidvest and ACSA to proceed with their 23.5 per cent stake sale to the Adani group. This would automatically entail that the conditions laid out by the investors would not be fulfilled.

This turned out be another deal breaker.

“This was the clearest possible evidence that the three investors had effectively abandoned the agreement since your action was in clear conflict with the spirit of the agreement,” GVK said, in its reply to the legal notice sent to the investors on Monday.

The three investors had announced acquisition of 80 per cent in GVK’s airport holding company GVKADL in October last year for Rs 7,614 crore. The money was kept in an escrow account in London and GVK was to get access to funds only after the transaction got all permissions from Indian authorities and lenders.

But as there was litigation going on between Bidvest and ACSA over right of first refusal (ROFR) agreement between Bidvest and GVK, the deal did not close.

GVK said the three investors should not create hurdles in the way of lenders’ efforts to find a speedy resolution of its debt as the agreement contemplated under the transaction documents is no longer valid.

The GVK group spent considerable amount of funds in pursuing and defending various legal proceedings in order to protect its ROFR and be able to consummate the transaction with the three investors. “Unfortunately, it became apparent that due to various circumstances, the transaction is no longer possible,” GVK said.

In a communication to the government, GVK group chairman, GVK Reddy said after the Covid pandemic struck, the operations of MIAL were severely impacted and additional funding was required to meet obligations. Hence, a quick resolution was need of the hour.

The Adani group not only agreed to help settle GVK’s debts but also agreed to provide liquidity to MIAL and commence construction of the Navi Mumbai airport. 

It offered a speedy resolution to all issues and was important to save a strategic asset like MIAL and ensure lender obligations are met.  

Reddy added, “Our arrangements, as being negotiated with the Adani group, will include settlement of our debt obligations with our lenders, which was the key driver for our original fund raising process. However, it will also bring required liquidity to MIAL and fast-track the construction of the Navi Mumbai airport.”