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Mon 6 Apr 2020 03:00 PM

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NMC rejects call for administration as debt crisis widens

Banks in the UAE have disclosed more than $2 billion of exposure to struggling private healthcare provider

NMC rejects call for administration as debt crisis widens

Simon Watkins, NMC group company secretary, said administration would not be in the interests of stakeholders.

Struggling hospital operator NMC Health Plc has rejected a call to be put into administration as banks in the UAE disclosed more than $2 billion of exposure.

Shares in Dubai Islamic Bank PJSC extended declines after the lender revealed its $541 million of exposure to NMC, risking almost half of its annual profit. Abu Dhabi Islamic Bank PJSC also tumbled after revealing it extended $291.4m to NMC, the UAE’s largest private health-care provider.

While Abu Dhabi Commercial Bank PJSC slumped after it asked a court to put NMC into administration on Saturday.

NMC aims to fight any such move, the company said on Monday.

In a note to the London Stock Exchange, Simon Watkins, group company secretary, said: “The board is in discussions with ADCB and other creditors to address creditors' concerns; to have the application withdrawn; and to avoid the appointment of administrators, which it does not believe would be in the interests of stakeholders as a whole.

“The resolution is likely to involve material changes to corporate governance of the group and the composition of the board itself.”

A hearing has been scheduled for April 9.

The collateral damage from the implosion of NMC and its sister companies is piling up, dragging in the UAE’s top lenders, central bank and health-care system. The fallout comes as banks battle to contain the impact of low oil prices and the coronavirus pandemic. The central bank on Sunday unlocked new aid to support lending and liquidity, and slashed reserve requirements after business conditions worsened at a record pace.

“It looks like this is going to be a very painful episode for the banks,” said Joice Mathew, head of equity research at United Securities in Oman. “When the regional economy is suffering with the challenges of the coronavirus, low oil prices and declining asset prices, the sheer size of these exposures will add further pressure on the profitability of these banks and weigh heavily on their shares.”

Citigroup Inc. analysts estimated that the impact on the five UAE banks it covers would total about 23% of 2020 profit, according to a note on Monday.

London-listed NMC, founded by Indian entrepreneur Bavaguthu Raghuram Shetty, had seen its stock plunge before it was suspended from trading amid allegations of fraud. Most of NMC’s senior management has resigned since it revealed more than $4bn of undisclosed debt. The company was also dropped from the FTSE 100 index.

With a market value of $2.4bn and total debt of $6.6bn, NMC now faces an investigation by the UK’s Financial Conduct Authority.

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