Rights issue plan could give govt majority stake in MTDC

The Board of Directors of Maldives Tourism Development Corporation (MTDC) has approved a proposal to be presented at the company's upcoming Annual General Meeting (AGM) to proceed with a rights issue that could result in the government becoming the majority shareholder of the company, Dhauru has learned.

According to a source familiar with the board's decision, the resolution was passed with the support of eight of the nine directors.

MTDC's board currently comprises five directors representing public shareholders and four directors appointed by the government.

The proposal seeks approval from shareholders to issue additional shares through a rights issue, a process in which existing shareholders are offered the opportunity to purchase new shares in proportion to their current holdings.

Rights issues are generally used by companies to raise capital. Shareholders may choose whether or not to purchase the additional shares offered.

According to the source, Ayada Maldives operator Aydeniz Group continues to owe MTDC one year's rent under its existing arrangements.

Sources told Dhauru that the proposed rights issue follows recent changes to the company's board and could enable the government to obtain majority control of MTDC if public shareholders do not purchase the additional shares allocated to them.

The government currently holds a 47 per cent stake in MTDC.

If shareholders decline to subscribe to the new shares and the government acquires the remaining allocation, the state's shareholding would increase, giving it majority control of the company.

Sources further alleged that the move is linked to plans to transfer the head lease of GDh. Maguhdhuvaa, where Ayada Maldives operates under a sublease agreement with MTDC, to Aydeniz Group.

According to the sources, previous attempts to proceed with the transaction faced opposition from a majority of shareholders.

Former Managing Director Ahmed Niyaz was reportedly removed from his position after opposing the proposed transaction. He was subsequently replaced by former Maldives Marketing and Public Relations Corporation (MMPRC) Managing Director Haris Mohamed.

Following Haris's appointment, MTDC issued a statement denying that it intended to sell the ownership or lease rights of any island.

MTDC had previously attempted to sell the head lease of Maguhdhuvaa for US$1.5 million.

However, under the existing sublease agreement with Aydeniz Group, quarterly lease payments are scheduled to increase over the duration of the agreement, reaching US$1.2 million per quarter during the final phase of the lease term.

The agreement has now entered its final five-year period, during which MTDC is expected to receive quarterly payments of US$1.2 million. Critics of the proposed transaction argue that transferring the head lease for US$1.5 million before the agreement expires would result in a loss of future lease income.

The rights issue proposal is expected to be considered by shareholders at the company's forthcoming AGM.