Mumbai: The Maldives government has given a comfort letter to Indian Overseas Bank (IOB), which has $25-million exposure to GMR Group’s Male airport project, assuring safety of lenders’ funds, a top bank official said today.
The quantum of compensation, however, will be decided through an arbitration process.
The Maldives government is poised to take over the Male International Airport with GMR agreeing to meet the midnight deadline to hand over the operations after the Indian infrastructure major lost a week-long legal battle.
“The Maldivian government has sent us a comfort letter, through Axis Bank, which is the lead lender to the Male airport project, to protect our money. The quantum of compensation will be decided through an arbitration process,” the state-run Indian Overseas Bank CMD M Narendra told PTI.
IOB had agreed to lend $50 million to the Male airport project, out of which it had already lent $25 million, he said.
The GMR Group had also secured a $358 million funding pipeline from Axis Bank, out of which it had already taken $160 million loan for the project, from Axis Bank’s Singapore branch.
Axis Bank officially refused to comment. A source at the bank said: “Maldives government has assured Axis Bank of compensation. The exact quantum of the compensation will be decided through arbitration”.
The source also said Axis Bank had last week sent a legal notice to the Maldivian administration through a Singapore-based law firm seeking protection of its funds lent.
Earlier, a GMR official had also confirmed that the bank had slapped a legal notice on Male, as the then Maldives government had stood guarantee to the funds, and that contract cancellation means the government should honour its commitment.
The $511 million Male airport project has 70 percent debt and 30 percent equity investment by the GMR Group. The company has already invested $238 million in the project, including an upfront payment of $78 million, GMR had said.
Yesterday, the Singapore Supreme Court had ruled in favour of Male and allowed it to take over the airport after agreeing to duly compensate the GMR Group through an arbitration project.
On 27 November, Maldivian President Mohamed Waheed cancelled the award given to GMR by his ousted predecessor citing impropriety in the deal and the high user development fees.