Abraaj Holdings had an “unusual” business model reliant on short-term borrowing, and key financial statements are missing or nonexistent, according to one of the firms tasked with salvaging the Dubai-based private-equity firm’s assets.
In a report seen by Bloomberg, PricewaterhouseCoopers said it has "been unable to obtain standalone annual financial statements or management accounts for the company." It noted "multiple layers of leverage" as the company borrowed to offset a "long-running liquidity shortfall between the investment management fees and operating expenses."
This is “an unusual practice for a structure operating in a private equity capacity,” PwC said. “It creates a highly unstable business model, sensitive to volatility and potential liquidity crises, particularly where the cost base cannot be funded by ongoing revenues,” according to the report, which was filed to a Cayman Islands court on July 11.
Deloitte and PwC were hired as the provisional liquidators of Abraaj, once one of the biggest private equity firms in the Middle East, which owes its creditors more than $1 billion. After an audit demanded by Bill Gates’s charitable foundation and others, the buyout firm ran into trouble after being accused of mingling investors’ money with its own in a health-care fund, setting in motion a series of events culminating in a voluntary liquidation filing in the Caymans last month.
PwC said that under Cayman rules, companies like Abraaj, which was founded by Pakistani executive Arif Naqvi in 2002, don’t need to file standalone financials, but it’s “highly irregular” for such a firm not to do so. A spokeswoman for Abraaj said they couldn’t comment on a report that is confidential, while a representative for PwC declined to comment.
PwC, which listed about 10 institutions among Abraaj’s creditors, also said in the filing that the buyout firm failed to maintain standalone audit reports.
“This lack of financial record-keeping raised the question of how the company’s directors were able to ensure that the company was solvent and being effectively managed,” the report said.
Abraaj Holdings posted a loss of $188 million at the end of March after dipping into investors’ money to run its operations, the filing shows. The company owes lenders $1.1 billion after the delayed sale of K-Electric in Pakistan led it to tap its health-care fund without investor consent, according to the report.
From 2014 to 2017, “management fee income and carried interest was insufficient to meet the Abraaj Group’s significant operating costs, with the result that any liquidity shortfall was largely funded through new borrowings,” PwC said.
Though the company has total assets of $1 billion, more than $900 million of secured debt is attached to that pool, leaving the net residual asset value at just $147.7 million, according to PwC estimates.
Since the firm’s initial liquidity crisis, allegations of mismanagement in other funds emerged. An audit by Deloitte found that Abraaj still owed $94.6 million to its Private Equity Fund IV after commingling investor funds with its own, according to findings of a review seen by Bloomberg.
The latest PwC report said that Abraaj owes a total of $170.8 million to two funds it manages -- Private Equity Fund IV and Infrastructure and the Growth Capital Fund.
_______________
Read more:
Dubai's Shuaa Capital joins First Abu Dhabi Bank in reporting Abraaj exposure
Dubai lenders Mashreq, CBD join FAB in declaring Abraaj exposure
Abraaj founder Naqvi faces UAE court ruling over bounced cheque
_______________
The buyout firm has been seeking to sell its fund unit and also the stakes it owns in the funds. Cerberus Capital Management LP and Colony Capital Inc. made new offers to buy some of Abraaj’s assets, people familiar with the matter said this week. Discussions on the sale of the firm’s asset management business are ongoing, a spokeswoman for Abraaj said at the time.
Meanwhile, lenders have been reporting their exposures to the firm, with Commercial Bank of Dubai PSC putting its exposure at $166.3 million of secured credit facilities, according to a statement Thursday. First Abu Dhabi Bank PJSC provided a three-year fully-secured $21.4 million term loan to Abraaj Holdings, while Mashreqbank PSC has an overall exposure of 66.46 million dirhams ($18 million) to Abraaj and its funds, the lenders said earlier.
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
UAE central contracts
Full time contracts
Rohan Mustafa, Ahmed Raza, Mohammed Usman, Chirag Suri, Mohammed Boota, Sultan Ahmed, Zahoor Khan, Junaid Siddique, Waheed Ahmed, Zawar Farid
Part time contracts
Aryan Lakra, Ansh Tandon, Karthik Meiyappan, Rahul Bhatia, Alishan Sharafu, CP Rizwaan, Basil Hameed, Matiullah, Fahad Nawaz, Sanchit Sharma
MATCH INFO
Manchester City 1 Chelsea 0
De Bruyne (70')
Man of the Match: Kevin de Bruyne (Manchester City)
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Clinicy%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202017%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Prince%20Mohammed%20Bin%20Abdulrahman%2C%20Abdullah%20bin%20Sulaiman%20Alobaid%20and%20Saud%20bin%20Sulaiman%20Alobaid%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Riyadh%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2025%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20HealthTech%3Cbr%3E%3Cstrong%3ETotal%20funding%20raised%3A%3C%2Fstrong%3E%20More%20than%20%2410%20million%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Middle%20East%20Venture%20Partners%2C%20Gate%20Capital%2C%20Kafou%20Group%20and%20Fadeed%20Investment%3C%2Fp%3E%0A
SPECS
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%201.5-litre%204-cylinder%3Cbr%3E%3Cstrong%3EPower%3A%3C%2Fstrong%3E%20101hp%3Cbr%3E%3Cstrong%3ETorque%3A%3C%2Fstrong%3E%20135Nm%3Cbr%3E%3Cstrong%3ETransmission%3C%2Fstrong%3E%3A%20Six-speed%20auto%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh79%2C900%3Cbr%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20Now%3C%2Fp%3E%0A
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
Zakat definitions
Zakat: an Arabic word meaning ‘to cleanse’ or ‘purification’.
Nisab: the minimum amount that a Muslim must have before being obliged to pay zakat. Traditionally, the nisab threshold was 87.48 grams of gold, or 612.36 grams of silver. The monetary value of the nisab therefore varies by current prices and currencies.
Zakat Al Mal: the ‘cleansing’ of wealth, as one of the five pillars of Islam; a spiritual duty for all Muslims meeting the ‘nisab’ wealth criteria in a lunar year, to pay 2.5 per cent of their wealth in alms to the deserving and needy.
Zakat Al Fitr: a donation to charity given during Ramadan, before Eid Al Fitr, in the form of food. Every adult Muslim who possesses food in excess of the needs of themselves and their family must pay two qadahs (an old measure just over 2 kilograms) of flour, wheat, barley or rice from each person in a household, as a minimum.
THE CLOWN OF GAZA
Director: Abdulrahman Sabbah
Starring: Alaa Meqdad
Rating: 4/5