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Wed 8 Apr 2020 09:44 PM

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UAE-based NMC heads to administration after bowing to creditor demands

Most of NMC's senior management has resigned since it revealed more than $4 billion of undisclosed debt.

UAE-based NMC heads to administration after bowing to creditor demands

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

NMC Health Plc has bowed to creditor demands to be placed into administration, saying it’s in no position to contest Abu Dhabi Commercial Bank PJSC’s efforts to install new management.

The troubled Middle Eastern hospital operator said on the eve of a London court hearing that it expects to be placed into administration “in due course”. NMC’s new executive chairman, Faisal Belhoul, had resisted creditors arguing that such a move would endanger lives as the coronavirus spreads across the United Arab Emirates.

However, Belhoul said late Wednesday: “The board of NMC Health has written to the court indicating that, notwithstanding strenuous efforts to address creditors’ concerns, it has not been able to secure their alignment and support and has been advised by its counsel that it is not in a position to oppose the application. Accordingly, the board expects the company to be placed into administration in due course.

“Realising regrettably that administration has become a certain outcome, I must now underscore that it is critical that the administration process is conducted quickly and smoothly, with the core objective of keeping the organisation stable and in a position to provide vital medical care to support the people, the government and the nation of the UAE during the Covid-19 pandemic."

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 $4 billion of undisclosed debt. The company was also dropped from the FTSE 100 index.

“Although a setback for regional markets, the outcome of this court process will set an important precedent,” said Ahmad Alanani, chief executive of Sancta Capital, a Dubai-based investor focused on special situations in the Middle East. 

“We hope that an administration will ultimately cleanse NMC’s balance sheet, identify the culprits behind this staggering default and help the business move past these events constructively.”

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

Abu Dhabi Commercial Bank’s exposure is about $981 million, while Dubai Islamic Bank PJSC has revealed a $541m exposure to NMC, risking almost half of its annual profit. Abu Dhabi Islamic Bank PJSC has reported extending $291.4m to NMC.

UAE-listed banks's exposure

Belhoul, urged administrators to provide stable management and ensure liquidity to maintain healthcare services.

He said: “The continuity of the executive leadership must also be maintained. This measure will ensure that the highest operating standards and quality of care continue to be delivered in this time of great need; and increase the chances that our hardworking doctors and healthcare professionals on the front line have the supplies they need and are fully supported in their duties.

“In light of this decision, banks and creditors involved in the administration process have a clear and pressing duty to extend credit lines and ensure that the company has the necessary liquidity to maintain healthcare operations and must continue to support the salaries of thousands of healthcare workers at this time.”

NMC was the first company from Abu Dhabi to list on the London stock exchange in 2012. The hospital operator’s troubles have renewed concerns about the lack of corporate governance in the UAE where both Abu Dhabi and Dubai in the past decade have transformed into two of the Middle East’s leading financial centres.

The move by the bank echoes that of another financial crisis in the Gulf, where a Kuwaiti fund helped precipitate the collapse of Dubai’s marquee investment firm Abraaj Group by pushing for administration in court. Meanwhile Abu Dhabi is still grappling with the fallout of the global scandal involving Malaysian sovereign fund 1MDB.

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