Major creditors oppose cash injection for Alliance

Alliance Medical Group creditors write to the company calling for it to be sold instead of a planned £35 million (Dh198.1m) infusion from Dubai International Capital.

Alliance Medical Group creditors yesterday wrote to the company calling for it to be sold instead of a planned £35 million (Dh198.1m) cash injection from its owner, Dubai International Capital. A group of senior creditors owed money by Alliance, which DIC bought in 2007 for £600m, sent a letter to the company and its advisers asking to begin the search for a buyer. Alliance's board could approve a sale as early as this week.

DIC, a private equity unit of the government-owned Dubai Holding, wants to restructure Alliance's business in co-operation with its junior lenders. Their plan, advanced in June, was to inject fresh funds to help it meet an upcoming debt payment of about £500m. But the senior lenders are now looking at a possible sale as a better way for the company to raise money and handle debts. Representatives of DIC could not be reached. Alliance declined to comment.

Recent media reports from the UK, where Alliance is a major provider of MRI and CT scanning services, have suggested a sale may be in the offing if restructuring talks break down before a debt repayment standstill expires on September 16. Some bankers, however, have hinted that raising the prospect of a sale could merely be a way for banks to jockey for better terms. A sale could be bad for DIC because as an equity holder it is lower than senior creditors in Alliance's financial pecking order.

Blackstone, which is advising Alliance, recently valued the company at between £300m to £340m. Depending on how a sale is structured, senior creditors could receive a large chunk of the proceeds, leaving DIC with little to show for its £600m investment made at the peak of the takeover boom in 2007. The wrangling over Alliance follows the recent end of a contentious battle between DIC and Oaktree Capital Management over Almatis, a German aluminium company.

DIC, which bought Almatis in 2007 for an undisclosed price, got into a row with Oaktree over competing plans to restore Almatis to financial health during bankruptcy hearings in the US. Oaktree, a major creditor of Almatis, settled the dispute this month by withdrawing a request for DIC to relinquish control of the company. As DIC settles disputes at companies in its private equity portfolio, it is also addressing borrowings it used to make some of its large acquisitions. DIC in May said it reached a deal to postpone debt repayments for three months.

DIC's parent company, meanwhile, is facing challenges of its own. Dubai Holding recently sold stakes in several companies it acquired in 2006 and 2007 after the reorganisation of its business into four "verticals" last year: business parks; hospitality; property; and investments. Late last week its Dubai Financial Group subsidiary sold a 4 per cent stake in the Bombay Stock Exchange, Asia's oldest bourse, to the billionaire investor George Soros for a reported US$35m (Dh128.5m).

Dubai Holding owns some of the emirate's most prized assets. The Jumeirah Group, which owns Dubai's Burj Al Arab hotel, and TECOM Investments, which runs Dubai Media City, Dubai Internet City and other economic free zones in the emirate, are among the companies in its portfolio. [e-mail]