Abraaj creditor seeks liquidation of Dubai buyout firm

Kuwait's Public Institution for Social Security steps up pressure on buyout firm that is facing allegations of misused funds
By Bloomberg
Thu 07 Jun 2018 01:56 PM

Kuwait’s Public Institution for Social Security is seeking the liquidation of Abraaj Holdings as creditors step up pressure on the Dubai-based buyout firm that’s facing allegations of misused funds.

The Kuwaiti fund filed a petition in the Cayman Islands for Abraaj to be “put into liquidation and wound up in accordance with the provisions of the companies law,” according to a notice posted in Abu Dhabi-based The National newspaper on Thursday. A hearing on the petition will take place on June 29.

The move is a further blow for Abraaj, once considered to be one of the developing world’s most influential investors. It managed almost $14 billion for institutions and supranational agencies from the US, UK and other countries. The buyout firm has been under pressure since February when some of its investors commissioned an audit to investigate the alleged mismanagement of money in its $1 billion health-care fund.

“Kuwaiti creditors feel they need to act quickly to prevent further deterioration, or they may feel Abraaj is a lost cause,” said Richard Segal, a senior analyst at Manulife Asset Management Ltd. in London. “If one pushes a liquidation, while the others agree to a standstill, they could end up fighting each other, and take their eye off the ball, which gives the debtor a negotiating advantage.”

Abraaj is “aware of the filing in the Cayman Islands by a single creditor and we continue to engage closely with them to reach a consensual outcome for the benefit of all parties,” it said in an emailed statement Thursday.

Abraaj said it expects its creditors to agree to a standstill on debt payments after a meeting with shareholders and banks on Monday. The company has been selling assets to raise liquidity and is also in talks to sell its asset-management division. Societe Generale and Mashreqbank are also creditors to the private equity firm, according to people familiar with the matter.

The petition “raises the specter of a court-ordered liquidation despite the consensual standstill agreement obtained by Abraaj with other creditors,” said Khalid Howladar, managing director of credit and sukuk advisory Acreditus. It also makes it “much harder for Abraaj to negotiate effectively on asset-sales until after the hearing.”

“The firm is continuing its discussions on the sale of the fund management business and talks are at an advanced stage,” Abraaj said in the statement. “Potential acquirers are engaging with key regional and international stakeholders and we are jointly working towards achieving a positive outcome.”

Kuwait’s Public Institution for Social Security said Abraaj was unable to repay a $100 million loan and $7 million interest by the agreed date of June 3, the Wall Street Journal reported last week. The country’s finance ministry, which supervises the Social Security fund, didn’t immediately respond to a request for comment.

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Last Updated: Thu 07 Jun 2018 01:57 PM GST

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