Dubai's Abraaj said to face lawsuit over Turkish dairy maker

Legal action comes as liquidators of Dubai-based Abraaj seek to dispose of assets in developing nations around the world to help repay more than $1bn in debt
By Bloomberg
Thu 19 Jul 2018 06:59 PM

Abraaj Group Ltd is being sued by one of the founders of a Turkish dairy maker that the embattled buyout firm is trying to sell, according to people familiar with the matter.

The legal action comes as liquidators of Dubai-based Abraaj seek to dispose of assets in developing nations around the world to help repay more than $1 billion in debt.

The lawsuits relate to the purchase in 2014 by the private equity firm and the European Bank for Reconstruction and Development of a majority stake in Yorsan Gida Mamulleri, the Istanbul-based producer of yogurt, cheese, milk and the traditional Turkish drink, ayran.

Serafettin Yoruk, who kept 20 percent of Yorsan following the deal, has filed three cases against Abraaj, said five of the people, who asked not to be identified because deliberations are confidential. He alleges that his stake has been diluted to 3 percent through what he deems have been unfair capital increases, the people said. Abraaj won one of the cases, one person said.

Representatives of Abraaj, EBRD and Yorsan declined to comment.

Abraaj was the Middle East’s biggest private equity firm, with almost $14 billion of assets, until accusations it mismanaged hundreds of millions of dollars of clients’ money sent it spiraling into collapse. Now its court-appointed liquidators, PricewaterhouseCoopers and Deloitte, are trying to sell the company’s assets, in part to pay back creditors.

Creditors shut off the taps after it was revealed late last year that some investors in a $1 billion healthcare fund, including the Bill & Melinda Gates Foundation and the World Bank’s International Finance Corp, had hired a forensic accountant to examine what happened to some of their money.

It turned out Abraaj had borrowed cash from the fund without giving notice to investors. That sparked a crisis of confidence and debt defaults that culminated in the 16-year-old firm filing for a court-supervised restructuring last month. New York-based hedge fund York Capital Management and buyout firm Cerberus Capital Management are among bidders for Abraaj’s asset-management platform, people familiar with the matter have said.

Abraaj is seeking to sell Yorsan and is in talks with five potential strategic buyers, two international and three local, said one of the people. Yorsan has 200 million liras ($41 million) of net debt and is running on negative equity after years of losses, said four of the people. EBRD wrote off its investment of almost $70 million, according to two of the people.

The private equity investor and EBRD, which own 80 percent of the dairy producer, gradually invested $360 million in the business, the people said. The companies took out an eight-year loan of $107 million from Turkiye Garanti Bankasi and Yapi Kredi Bankasi in 2014 to finance the acquisition, according to data on Bloomberg.

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Last Updated: Thu 19 Jul 2018 07:06 PM GST

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