MTDC exploring new route for Maguhdhuvaa lease deal, source says

The Maldives Tourism Development Corporation (MTDC) is continuing efforts to transfer the head lease of Gaafu Dhaalu Maguhdhuvaa to the Turkish company operating Ayada Maldives, with alternative arrangements now being considered after the proposed transaction faced opposition from members of the corporation's board, according to a source cited by Dhauru.

Reports emerged last month that MTDC was seeking to sell the head lease of Maguhdhuvaa, which was leased to the corporation by the government for resort development, to the company operating Ayada Maldives for USD 1.5 million.

Questions were raised over the proposed price because of the income MTDC is due to receive under the existing sublease agreement.

During discussions over the transaction, Ahmed Niyaz, who served as MTDC's Managing Director, was removed from the post. Niyaz was understood to have been among the board members who opposed proceeding with the transaction.

Former Maldives Marketing and Public Relations Corporation Managing Director Haris Mohamed was subsequently appointed as MTDC's Managing Director.

Following his appointment, MTDC issued a statement earlier this month denying reports concerning the sale of Ayada. The corporation said it had no intention of selling ownership rights over islands entrusted to MTDC.

However, a source who spoke to Dhauru on condition of anonymity said efforts relating to the Maguhdhuvaa transaction continued after Haris took office.

According to the source, attempts to proceed with the transaction again faced opposition from several members of the MTDC board, preventing the proposal from being approved.

The source said an alternative arrangement involving the dilution of MTDC's shares is now being considered.

Share dilution involves issuing additional shares, increasing the total number of shares in a company and reducing the percentage ownership of existing shareholders who do not acquire additional shares.

According to the source, such an arrangement had also been considered previously. While some board members opposed a direct transfer of the Maguhdhuvaa head lease, the source said there had been less opposition to a proposal involving the issuance of additional shares.

The plan is linked to efforts to return majority control of MTDC to the government, which currently holds a 47 per cent stake in the corporation, the source said.

Under the proposed arrangement, MTDC would issue additional shares. The expectation is that existing public shareholders would have limited interest in acquiring the new shares because of the market value of MTDC shares.

The government could then purchase the additional shares that are not taken up by existing shareholders. This would increase the state's stake in MTDC and could give the government majority ownership of the corporation.

According to the source, the government is also seeking to encourage the arrangement by offering MTDC an additional lagoon or plot of land.

Neither MTDC nor the government has publicly confirmed such a plan.

The proposed transaction has also raised questions over the value at which the Maguhdhuvaa head lease would be transferred.

According to information previously reported, MTDC had sought to sell the head lease for USD 1.5 million.

Under the existing sublease agreement with the Turkish operator, however, the quarterly rent payable to MTDC increases over the term of the agreement and reaches USD 1.2 million per quarter.

The sublease has about five years remaining.

At a quarterly payment of USD 1.2 million, four quarterly payments alone would amount to USD 4.8 million. The proposed USD 1.5 million price for the head lease would therefore be below the amount MTDC could receive from four quarters of rent at that rate.

With several years remaining under the sublease, the proposed transaction has raised questions over the financial basis for transferring the head lease before the existing agreement expires.

MTDC has previously denied that it intends to sell ownership rights over islands entrusted to the corporation. However, according to the source cited by Dhauru, discussions on an alternative mechanism for the Maguhdhuvaa transaction remain ongoing.