NMC Health in talks with lenders to stave off administration

A UK High Court hearing to appoint administrators has been scheduled for April 9

General view of NMC specialty hospital in Abu Dhabi, United Arab Emirates, February 11, 2020. REUTERS/Satish Kumar
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Embattled company NMC Health said it is in talks with lenders in a bid to stave off the appointment of administrators as requested by its main creditor Abu Dhabi Commercial Bank.

The company, the largest private healthcare provider in the UAE, said it is “in discussions with ADCB and other creditors to address creditors’ concerns; to have the application withdrawn; and to avoid the appointment of administrators, which it does not believe would be in the interests of stakeholders as a whole”.

“The resolution is likely to involve material changes to corporate governance of the group and the composition of the board itself,” the company said in a statement to the London Stock Exchange, where its shares trade.

ADCB, which is owed US$981 million (Dh3.6bn) by NMC Health, revealed to the Abu Dhabi Stock Exchange on Saturday that it is looking to place the company into administration.

A hearing date for a UK High Court application brought by ADCB is set for Thursday.

The lender is looking to appoint administrators to “safeguard the future of NMC Health and its subsidiaries”, it said. ADCB has said its requests for greater transparency had so far been ignored by NMC and that the appointment of administrators would bring forward a “full, transparent and independent investigation” into the company’s affairs.

NMC Health has made a series of damaging disclosures in the past few months after a report by activist investor Muddy Waters in December alleged it inflated cash balances, overpaid for assets and understated its debt.

Last month, the company said its debt stood at $6.6bn, substantially higher than the $2.1bn declared in its last filed accounts. A review committee also discovered evidence of "suspected fraudulent behaviour".

NMC Health owes the debt to more than 80 local, regional and international lenders, according to disclosures from ADCB and Dubai Islamic Bank.

On Sunday and Monday UAE banks revealed they have an exposure to NMC exceeding Dh8.1bn.

In a media briefing held by videoconference on Monday the head of the UAE Banks' Federation, Abdulaziz Al Ghurair, said lenders had been justified in extending loans "because they dealt with an audited balance sheet from [a] top four [accounting firm]".

"They dealt with a company, which is listed in FTSE 100 and they thought there was enough supervision of the regulator in the UK," Mr Al Ghurair said.

"They have looked at the balance sheet and if you look at the balance sheet, it does support this kind of level of lending. Now unfortunately, this balance sheet was fraud."

Banks need to place a level of trust in auditors, company boards and market regulators, Mr Al Ghurair said. He also encouraged UAE lenders "to come together and take one uniform action to recover their money, and I think they will recover their money”.

New executive chairman Faisal Belhoul, who was appointed in late March after his private equity firm, Ithmar Capital, took a 9 per cent stake in the business, has called on lenders to agree to a standstill on NMC's debts to give him time to stabilise the company and strengthen its procedures.

He has argued placing the company into administration will "cause instability to the operating businesses of" NMC and create "additional pressure on the group’s liquidity and reduce value for all creditors”.

"This would be damaging not only to the interests of creditors but, in the midst of the Covid-19 crisis, would potentially put lives at risk,” Mr Belhoul said on Saturday.

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