NMC Health appoints advisers as it seeks standstill on $2bn of debt

The company is looking for an informal standstill in its agreement with lenders

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 appointed financial and legal advisers as the it seeks a "standstill" on $2 billion (Dh7.34bn) of debt, which may become subject to lender review.

NMC appointed Moelis & Company, PwC and Allen & Overy as independent financial adviser, operational adviser and legal adviser, respectively, with immediate effect, the company said in a statement on Monday to the London Stock Exchange, where its shares trade. Moelis will advise NMC on discussions with its lenders, while PwC will assist on "liquidity management and operational measures".

“NMC is currently fully focused on safeguarding operational liquidity to continue funding existing operations throughout its various subsidiaries,” the healthcare provider said. “In this context, NMC is asking for continued support and an informal standstill in relation to existing facilities from its lenders to achieve an immediate stabilisation of the group's financing.”

The informal standstill includes a request to banks not to exercise any rights and remedies that may arise from current or default breaches in loan covenants with lenders, according to the statement. The company did not name the lenders, but they include foreign and local banks, people familiar with the matter told The National.

The company's stock has lost two-thirds of its value after short-seller Muddy Waters Research claimed in a report published in December, that NMC had inflated the prices of companies it acquired and manipulated its balance sheet. The company denied the claims and commissioned an independent review by former FBI director Louis Freeh's company.

NMC has attracted interest from potential bidders, including Kamel Ghibri's GK Investment Holding. Despite media reports, Mubadala Investment Company has not approached any company or external parties regarding NMC, according to people familiar with the matter who spoke to The National. Private equity company Kohlberg Kravis Roberts has said it is not interested in making a bid for the company.

NMC said it has an existing agreement where lenders initially committed $2bn to the company, but which contained change of control provisions where lenders could cancel any unutilised commitments and where "outstanding participations become due and payable" within a five-day notice period.

The company said on Monday that principal shareholders, including Khaleefa Al Muhairi, Saeed Al Qebaisi and BR Shetty together now hold, directly or indirectly, less than 30 per cent of NMC's issued share capital.

The development comes as the UK’s financial regulator, the Financial Conduct Authority, begins an investigation into the company, after trading in its shares on the LSE was suspended last week.

The company also removed its chief executive Prasanth Manghat and granted its finance chief extended sick leave amid an investigation into the company's finances.

Mr Freeh's company Freeh Group International Solutions "identified potential discrepancies and inconsistencies" in NMC's bank statements and ledger entries. The review also found evidence of previously undeclared supply chain financing arrangements in place between a number of entities and companies controlled by the company's founder, Mr Shetty, and former vice chairman Mr Al Muhairi, where NMC had acted as guarantors. Mr Shetty and Mr Al Muhairi resigned from the company last month.

NMC owns and manages more than 200 facilities, including hospitals, medical centres, day surgery centres and home health clinics across the UAE, UK and Europe. It treats more than 8.5 million patients a year, according to the company website.

NMC is also anticipating a reappraisal of its external credit ratings, it said on Monday.