Tell Group, an investment firm led by a former UBS and Deutsche Bank banker, has proposed to buy seven funds managed by Abraaj Group for $25 million, according to documents, which were reviewed by The National, that lay out details of the company's bid, as a meeting of creditors of the now defunct private equity firm looms.
Tell, which is regulated by the DFSA in Dubai, Switzerland's FINMA and Algeria's COSOB and chaired by Swiss-Algerian Yassine Bouhara, is proposing to pay "up to $25m all the costs/expenses required to transfer the management rights of select funds (AAF3, ANAF2, ATF1 ASEAS, APEF 4, ICGF, AAF) to a clean existing or newly formed subsidiary (NewCo) of Abraaj Holding (AH)", according to the letter seen by The National.
The new subsidiary will be 20 per cent owned by Tell and 80 per cent by all the unsecured creditors of AH and its Cayman Islands entity AIML that oversaw 40 different Abraaj funds. The proposal, as laid out, would effectively make Gulf investors including an airline and a pension fund among others, the owners of Abraaj. It will also allow them to recover funds that otherwise under a different deal may not be possible.
“Solutions considered to date are not in our opinion viable: they are value-destructive for both the funds’ limited partners’ (LPs) and the Abraaj Holding (AH) / Abraaj Investment Manager (AIML) creditors, while creating significant legal tail risks and complexities for the LPs and JPLs to navigate,” an executive summary accompanying the proposal said. “Similar issues were raised in the Lehman [Brother] restructuring in 2008, and led to extensive, lengthy and expensive litigation.”
Lehman Brothers, which had over $600 billion of assets was the largest bankruptcy in US history and triggered a global credit crisis.
“The current process is marked by a deep misalignment of interests and interference from related parties and employees potentially seeking to monetise the situation or to pursue personal agendas; this could create material value leakage against both the creditors’ estates and the LPs interests,” Tell said in the summary, accompanying the proposal.
Mr Bouhara declined to comment when reached by The National. The chief executive of the airline and representative of the pension fund were not reachable when contacted by phone. It's the understanding of The National that a meeting will take place as early as Thursday afternoon or Friday between the creditors, unsecured investors and Tell in Dubai to review the proposal.
Abraaj, which claimed to have managed almost $14bn in assets, was forced into liquidation last June after a group of investors, including the Bill & Melinda Gates Foundation, the World Bank’s International Finance Corporation and The Overseas Private Investment Corporation, a US government agency, commissioned an audit to investigate the alleged mismanagement of money in its $1bn healthcare fund. That investigation widened the scope of scrutiny of the company and misappropriation of funds of US investors and a US government agency attracted the attention of the Securities and Exchange Commission and other US authorities.
"There will be no legacy Abraaj exposure. Like any other proposal on the table there is no involvement of Abraaj senior management in this proposal. There is no benefit that has been agreed by us to them and the platform will be rebranded," Mr Bouhara wrote in the May 24 proposal letter addressed to investors and seen by The National.
“The new shareholders of Abraaj Holdings will be the creditors like in any distressed debt for equity swap. This structure allows a clean financial and legal framework. There is in reality a clean break with the Abraaj legacy platform without triggering any costly or complex change of control. This structure creates the required strategic alignment and symmetry between the creditors and the LPs [Limited Partners] interests,” Mr Bouhara wrote in the aforementioned letter.
In January British private equity firm Actis was manoeuvring to take over Abraaj’s APEF4 $1.6bn buyout fund as part of the liquidation process, however some investors have not been supportive. Last month US private equity firm TPG took over the management of Abraaj’s $1bn healthcare fund, which it renamed Evercare Healthcare Fund.
Mr Bouhara’s team overseeing the execution of the proposal includes Amine Tazi-Rifi, a former global senior partner at McKinsey for Switzerland and African operations, and Sethu Palaniappan, who previously was the co-chief operating officer of the global equities division at Swiss bank UBS.
