UAE companies declare exposure to NMC Health as administration looms

Banking groups have reported exposure worth more than Dh8bn

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/BloombergShow less

The UAE’s publicly-listed companies began reporting their exposure to NMC Health, the embattled healthcare operator, which is at risk of being placed into administration.

As of Sunday, banks in the UAE had declared a combined exposure of about Dh8.04 billion ($2.16bn) in the form of loans to the group and its subsidiaries.

Abu Dhabi Commercial Bank, the company’s biggest individual lender, is owed $981 million, it said in a statement to the Abu Dhabi Securities Exchange last week. ADCB on Saturday said it has approached the UK's High Court to place NMC Health into administration “to protecting its interest and assuring the long-term sustainability of the company”.

Dubai Islamic Bank, the largest Sharia-compliant lender in the UAE, said it is owed $425m. It also said Noor Bank, which it acquired in January, has a loan exposure of $116m.

“The bank has been monitoring recent developments at the [NMC] group. In conjunction with other substantial creditors, the bank is now in discussions with the group and its advisers to ascertain the group’s financial position and identify potential measures to address the group’s governance and financial issues,” DIB said in a statement to the Dubai Financial Market, where its shares trade.

The lender said it is “taking appropriate actions to protect its interests and fully appreciates the vital role that the group’s healthcare services play in our local communities, particularly at this time”.

Abu Dhabi Islamic Bank reported loan exposure of $291.4m to the healthcare company, and said it had a $31m investment in a sukuk issued by the company. Reem Investments also declared a $1m investment in NMC Health's sukuk.

Dubai's largest lender, Emirates NBD, reported Dh747.34m, including Dh676.46m to Emirates Islamic Bank. Khaleeji Commercial Bank said it is owed $30m by the healthcare firm.

Ajman Bank declared an exposure of Dh151.9m to NMC, while United Arab Bank reported total exposure of Dh135.3m. The National Bank of Ras Al Khaimah, RAKBank, said it is owed Dh100.2m, Sharjah Islamic Bank is owed Dh29.6m and Mashreq Bank said it is owed Dh502,598 from subsidiary New Medical Centre Training.

An equities fund controlled by the bank, Makaseb Arab Tigers Fund, also holds 25,000 shares in the company.

Al Salam Bank revealed a transaction where it had offloaded some shares, but it retains a direct stake of about 4.9 per cent in NMC and an indirect stake of just below 3 per cent.

Aramex, the largest courier company in the Middle East, said it is owed about Dh335,000 by NMC and UAE Exchange, which was also founded by NMC’s founder, B R Shetty, and is owned by Finablr, a listed London entity in which Mr Shetty retains a majority stake.

Regulators asked listed firms to declare their exposure to NMC Health, UAE Exchange (whose operations are being overseen by the Central Bank of the UAE) and Finablr.

ADCB said it is owed a further $182m by Finablr Group and its subsidiaries, including UAE Exchange.

Commercial Bank International declared Dh425.6m to NMC Health, Finablr and UAE Exchange, but it did not break down how much it was owed by each company.

National Bank of Fujairah put its total exposure to the three entities at Dh289.1m, with the bulk of this (Dh276.2m) owed by Finablr group and its subsidiaries.

Umm Al Qaiwain-based bank NBQ said it is owed Dh50m by UAE Exchange

NMC Health’s new chairman Faisal Belhoul has requested lenders enter into a standstill agreement on the company’s debt, and said placing the company in administration "would cause instability to the operating businesses of the NMC Group, creating additional pressure on the group’s liquidity and reducing 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,” said Mr Belhoul, whose private equity company Ithmar Capital acquired a 9 per cent stake in the business in late March.

He also pledged the company would be more transparent and put stronger governance structures in place.

ADCB, however, said it is seeking the appointment of administrators to “safeguard the future of NMC Health and its subsidiaries”, arguing that its requests for greater transparency to date had been ignored by the company.

It served notice of its intention to apply to the High Court to place the company into administration on Friday, saying the joint administrators appointed would launch a “full, transparent and independent investigation” into the company’s affairs.

NMC Health is understood to have exposure to more than 80 local, regional and international financial institutions, according to the filings of ADCB and DIB.

The company was forced to make a series of damaging disclosures in the last few months after a report by activist investor Muddy Waters in December, which alleged it had inflated cash balances, overpaid for its assets and understated its debt.

Last month, it said its debt stood at $6.6bn (Dh24.24bn), substantially higher than the $2.1bn declared in its last filed accounts. A review committee also discovered evidence of "suspected fraudulent behaviour".

Two joint chairmen, including the company’s founder, an executive vice-chairman, a chief executive, a chief financial officer and a member of its treasury team have all resigned from the business.

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A look back at our interview with BR Shetty from last year