Dubai Islamic Bank wins latest round of ongoing legal tussle with NMC's administrators

Case goes to arbitration with administrators ordered to pay 75% of the lender's costs to date

Joint administrators have pledged to step up legal action to recover more than $4bn missing from NMC Healthcare once its restructuring is finalised. Reuters

Dubai Islamic Bank on Sunday said it remained committed to the restructuring of NMC Healthcare but said the process "must be based on an acknowledgement of existing legitimate security interests" after winning the latest round of a legal tussle in the Abu Dhabi Global Market Courts.

The joint administrators for Abu Dhabi-based NMC, Richard Fleming and Benjamin Cairns of Alvarez & Marsal, had brought legal action against DIB in March in a dispute related to the lender's attempts to enforce its security over sums held by 12 insurers that the healthcare company had set aside as collateral for loans.

Administrators had argued that a moratorium on all legal proceedings related to the healthcare group had been secured once NMC Healthcare and 35 other entities were placed into administration in the ADGM Courts in September last year.

However, DIB had challenged ADGM Courts' jurisdiction to rule in its legal disputes with the insurers. In a hearing last week, the judge referred the case to arbitration, but ordered administrators to pay both their own and 75 per cent of DIB's legal costs thus far. The Dubai lender's legal costs to date are $1.2 million, Reuters reported last week, citing a court transcript that has yet to be filed on the ADGM Courts website.

"The judge affirmed that DIB was 'the overall winner in this phase of the legislation'," the lender said in a statement to the Dubai Financial Market, where its shares trade, on Sunday.

"In addition to the ADGM legal proceedings, DIB continues to successfully obtain judgments in our favour in the Dubai Courts ordering the relevant insurance companies to make payments" assigned to the lender under its loan agreement with NMC, it added.

"DIB is one of the largest creditors to the NMC Group. We affirm our commitment to support a restructuring of the NMC business to ensure its successful emergence from administration. Any such restructuring must be based on an acknowledgement of existing legitimate security interests in accordance with the provisions of applicable laws," the bank said.

NMC was founded by BR Shetty in 1975 from a single clinic and grew to become the UAE's largest privately-owned healthcare group, with a listing on the London Stock Exchange that valued the company at £8.58 billion ($11.81bn) at its peak in August 2018. However, an independent investigation was commissioned after activist short seller Muddy Waters issued a report in December 2019 alleging it had inflated its assets and under-reported its debt.

The investigation uncovered more than $4bn of previously-unreported debt owed to hundreds of lenders. DIB was NMC's second-biggest creditor in the UAE, owed about $425m.

DIB only stood to recoup about $19m of this through the formal restructuring process without imposing security, or about $86m through the imposition of securities, according to figures provided to the ADGM Court hearing by the administrators. Administrators argued this would have a "considerable impact on what would be available to pay other creditors".

A restructuring process has been approved by the majority of NMC's creditors by value, which will lead to more than $4bn of the group's debt being wiped off in exchange for 'exit instruments' redeemable in the event of a future sale of the company. This will allow the business to exit administration in Abu Dhabi with a more manageable debt pile of $2.25bn.

In a statement to The National, joint administrators Alvarez & Marsal said they had secured important rights on behalf of other creditors in respect of receivables that "have been appropriated by DIB" through the ADGM Court action.

The lender "seems to be making too much of seeking to undermine the successful restructuring of an essential asset" of the UAE's health services, it added.

The fallout from the NMC affair is likely to keep courts in a number of jurisdictions busy for years to come. Joint administrators "intend to start commencing legal actions" to recover some of the missing money once the restructuring is finalised, Mr Fleming told The National last week

On Friday, a court in the UK ruled that NMC's former deputy chief financial officer, Suresh Kumar, will have to proceed with his defence of a $1bn fraud case brought by the healthcare group's biggest lender, Abu Dhabi Commercial Bank, in the UK courts against former directors, according to Law360, a legal news website. Other company officers had challenged the UK court's jurisdiction to hear the case.