Indian infrastructure group GMR Infrastructure and GMR Airports Limited (GAL) agreed to a settlement of their arbitration dispute with private equity investors SBI Macquarie, Standard Chartered and JM Financial Old Lane.

“The deal structure was unique and bespoke,” said Manish Gupta, a partner at Link Legal, the adviser to GMR Group in both the arbitration and the settlement proceedings. “It involved complex structuring to provide partial exit to the existing investors by way of a cash pay-out, conversion of some of their existing securities into equity shares, as well as issuance of non-convertible debentures.”

In accordance with the settlement agreement, all parties are to withdraw the ongoing arbitration. The investors, and certain affiliates, will acquire 5.86% equity of GAL at a valuation of ₹210 billion (US$2.9 billion) and receive a payment of ₹35.60 billion in lieu of their entire compulsorily convertible preference shares (CCPS). GMR received the consent award from the arbitral tribunal based on the settlement agreement.

The dispute arose over the conversion of CCPS held by the private equity investors, who had invested ₹14.78 billion in GAL between 2011 and 2012. “There were many twists and turns in the entire process, which made it interesting from beginning to end,” said Gupta.

Elaborating on the challenges of the proceedings Gupta said the commercial understanding kept evolving and any change had a knock-on effect on the entire process, requiring all the parties to re-analyze everything. He said there was also a trust deficit between the parties due to the ongoing arbitration, and nobody wanted to take a step that could be counterproductive for them in the arbitration proceedings in the event of failure of settlement talks.

Gupta said all settlement options were complicated, and each party wanted to secure every step and analyze its options, as well as the effect of non-completion of other steps on the overall commercial understanding and arbitration proceedings. Different investors also sometimes had different approaches, and it was difficult to bring them together. Finally, regulatory challenges were to be addressed without disturbing the commercial understanding.

On the decision to settle, Gupta noted that completing the arbitration proceeding and receiving an award would not have been the end as the losing party would definitely have challenged it and the winning party would have had to fight another battle to implement the award.

Link Legal’s team comprised partner Gupta, associates Ashish Ahluwalia, Gautam Mudgal and Rashi Singh. CMS Singapore assisted Link Legal and GMR in making filings with the Singapore International Arbitration Centre, the arbitration venue.