NMC Health's debt 'materially' higher than previously declared

Company says current debt stands at about $5bn, compared with $2.1bn stated in previous accounts

A logo sits on display outside the NMC Speciality Hospital, operated by NMC Health Plc, in Abu Dhabi, United Arab Emirates, on Sunday, March 1, 2020. Troubled NMC Health Plc, the largest private health-care provider in the United Arab Emirates, asked lenders for an informal standstill on its debt as Abu Dhabi weighs an injection of capital to safeguard the emirate’s reputation among global investors. Photographer: Christopher Pike/Bloomberg
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NMC Health said on Tuesday it has debt of about $5 billion (Dh18.4bn), which is more than twice the previously declared amount.

The company said advisers appointed to work out renegotiation of its debts earlier this month discovered NMC's group liability is “materially above” the number last reported in its interim accounts for the first six months of last year.

“In addition to $2.1bn group debt reported at June, 30 2019, the company has identified over $2.7bn in facilities that had previously not been disclosed to or approved by the board,” NMC said in a statement to the London Stock Exchange, where its shares trade, after markets closed on Tuesday.

The company's debt is “currently estimated to be around $5bn”, but work on verifying this figure is ongoing.

NMC’s $400 million in five-year sukuk notes due November 2023 plunged to 36.5 cents on the dollar to 24.8 on Wednesday, according to Refinitiv data.

The disclosure on Tuesday is the latest in a string of revelations emerging from one of the largest healthcare providers in the UAE, since the publication of a report from activist investor Muddy Waters Research in December. The US company claimed NMC had inflated cash balances, overpaid for its assets and understated its debt.

The healthcare company denied the allegations and in January appointed former FBI director Louis Freeh and his risk management company Freeh Group International Solutions to look into the allegations.

NMC has since reported that some of its principal shareholders had misstated the size of their shareholdings, leading to the departure of the company’s founder and former joint chairman, BR Shetty, and former executive vice chairman Khalifa Al Muhairi.

Mr Freeh's company also “identified potential discrepancies and inconsistencies” in NMC's bank statements and ledger entries, and found evidence of previously undeclared supply chain financing arrangements in place between a number of entities and companies controlled by Mr Shetty and Mr Al Muhairi, where NMC had acted as guarantors. It dismissed chief executive Prasanth Mangath and placed its chief financial officer on a long sick leave. A member of its treasury team was also suspended.

NMC has also faced cash flow issues, which have led to delays in paying some staff but on Sunday a source told The National that about 80 per cent of its staff have now received salaries, with 20 per cent of workers still waiting for payment.

The UK’s Financial Conduct Authority has also launched an investigation into NMC's activities.

The company, which owns and manages more than 200 medical facilities, is understood to be in talks with a number of local and international companies lining up potential bids. But on Monday, GKSD Investment Holding, one of Europe’s largest hospital groups, announced it does not intend to proceed with an offer. Private equity company KKR had also previously ruled itself out from making a bid.