Abraaj seeks Cayman court-supervised restructuring to protect all stakeholders

Liquidation move has the support of company’s secured creditors who want to work with the private equity firm to restructure its liabilities

Abraaj’s founder and chief executive Arif Naqvi is one of the airline’s board directors, according to Air Arabia’s website. Ruben Sprich/Reuters

The Abraaj Group is seeking a court-supervised restructuring as the embattled private equity firm tries to protect its assets and limit the fallout of allegations of misusing investors' funds amid legal battles with some of its creditors.

The company has filed an application in the Grand Court of the Cayman Islands where it is registered, seeking the appointment of three representatives of PricewaterhouseCoopers as joint provisional liquidators (JPLs), it said in an emailed statement on Thursday. The move aims to protect the rights of all stakeholders, while JPLs work on a “consensual restructuring” of the company's obligations, it said.

The appointment of liquidators imposes a moratorium on the enforcement of all unsecured claims against Abraaj, allowing time for a proposal to be put to creditors. The move to liquidation has the support of company’s secured creditors who want to work alongside Abraaj to restructure its liabilities, the buyout firm said.

A secured creditor is a lender or creditor that extends capital or is associated with an investment that is backed by collateral.

“The process of court supervised restructuring will take a few months. I will continue to support this orderly process,” Abraaj founder and chief executive Arif Naqvi said in the statement. “This process marks the culmination of an extremely complex and challenging phase of negotiations…… since our differences with certain investors first came to light, we have worked exhaustively and transparently to investigate the matter and address their concerns.”

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The Middle East’s biggest buyout company, which at its peak had more than $13.6 billion (Dh49.96bn) of assets under management, is reeling from allegations of misusing funds in a healthcare investment vehicle that deployed capital from investors including the Bill & Melinda Gates Foundation, the World Bank’s International Finance Corporation, the UK’s CDC Group and Proparco Group of France.

The company has denied any wrongdoing.

It is under intense pressure from creditors and stakeholders since February as the allegations snowballed. The group has tried to reorganise its business, with Mr Naqvi ceding control of the funds management business, which the firm is trying to sell along with its stakes in other companies to resolve liquidity issues.

Abraaj has already raised $52 million by selling its entire shareholding in Egyptian contractor Orascom Construction. The company offloaded more than 6.25 million shares, or 5.4 per cent stake, in the contracting firm at $8.30 per share, Orascom Contracting said on Thursday in a shareholding disclosure to Nasdaq Dubai, where its stocks are traded.

Despite the turbulent times, approximately 50 companies in the current generation of Abraaj funds have kept growing, Mr Naqvi said. “Provisional liquidation of Abraaj Holdings will create a more controlled basis for moving forward, without impacting the day-to-day management of the funds and the underlying portfolio businesses,” he added.

It is not clear how the provisional liquidation move by Abraaj will impact the legal challenges it facing from its unsourced creditors.

Kuwait’s Public Institution for Social Security (PIFSS), earlier this month filed a petition in a Cayman Islands court seeking liquidation of Abraaj after it defaulted on a $100m loan that was due on June 3. PIFSS, which started its relationship with Abraaj in 2004 and by 2013 had made $731.8m in investments and loans to the firm, has since gotten back $346.2m from the private equity company.

Auctus Fund is the second creditor this month to file a lawsuit against Abraaj, according to a Reuters report.

An Abraaj spokesperson did not respond to a request for comment.

Auctus Fund wants Abraaj's investment management unit to be wound up and Grant Thornton to be appointed official liquidators, according to the petition, the report said.