Abraaj restructuring request approved by Cayman Islands court

Application to revamp fund management arm also approved, paving the way for a court-supervised sale

Abraaj Group chief executive Arif Naqvi. World Economic Forum

Abraaj Group said on Tuesday a Cayman Islands court approved a request by the embattled buyout firm for a provisional liquidation of the business, enabling a court-supervised restructuring and protection of stakeholders’ rights.

The Grand Court of the Cayman Islands appointed Simon Conway of PwC Corporate Finance and Recovery (Cayman) and Michael Jervis and Mohammed Farzadi of PricewaterhouseCoopers, as joint provisional liquidators (JPLs) of Abraaj Holdings, during a hearing on Monday, Abraaj said in a statement.

“This order validates the position consistently maintained by Abraaj that an orderly restructuring, under the guidance of a highly experienced team of joint provisional liquidators, can ensure the outcomes we seek for the company and its creditors,” said Arif Naqvi, founder and chief executive of the Abraaj Group.

The court also approved a request by Abraaj Investment Management Limited (AIML) for a court-supervised restructuring of Abraaj’s fund management business and appointed David Soden and Stuart Sybersma of Deloitte as JPLs. Abraaj has been hoping to sell the funds business, which was separated from the holdings company in February when the group reorganised its structure and appointed Omar Lodhi and Selcuk Yorgancioglu as co-chief executives of AIML.

The court supervised restructurings will have “minimum impact on the day-to-day operations of the management of the funds and their portfolio companies”, the statement from Abraaj added.

At the same time, they will enable Abraaj to restructure its liabilities and pursue the sale of the funds management business under the supervision of the court and in the interest of the majority of stakeholders.

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“It is a smart and good outcome for the creditors and the company,” said Khalid Howladar, managing director of credit and sukuk advisory Acreditus. “The JPL appointments give Abraaj the breathing space to negotiate more effectively with prospective buyers and hence realise better value for creditors. In addition, their oversight will crucially provide independent and trusted governance for all parties involved.”

“A liquidation-triggered fire sale of assets would destroy a lot of value and particularly impact the unsecured creditors.”

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

The Middle East’s biggest private equity company, which at its peak had more than $13.6bn of assets under management, is reeling from allegations that it misused funds in a healthcare investment vehicle. The $1bn Abraaj Growth Markets Health Fund 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 Wall Street Journal and The New York Times in February claimed that some of around 24 investors had hired investigators to find out what had happened to some of the money invested in the fund. Abraaj denies any wrongdoing.

The group is trying to reorganise its business, and sell its funds management unit along with its stakes in other companies to resolve liquidity issues.

“Our role is to manage the restructuring of Abraaj Holdings in an orderly fashion, safeguard the assets of the company, and ensure that the interests of creditors, employees and broader stakeholders are fully served,” Mr Jervis said in the statement on Tuesday.

“The court order enables the company to swiftly move into a stable phase of operations whereby restructuring plans and asset disposals can be executed in a protected and controlled environment.”

ADCM, a Cayman Islands-registered unit of Abu Dhabi Financial Group, has made a conditional offer to buy Abraaj’s management interest in all of its limited partnerships for $50m, according to a Reuters report on Tuesday.

ADFG declined to comment when contacted by The National.