‘NMC financials were misstated right from IPO year onwards’

NMC’s financial performance surpasses targets; syndication for $65 mn from Oct 12

ABU DHABI/October 10: The evidences compiled so far by the NMC Administrators’ team point to the intriguing fact that the financial statements published by the ‘now-infamous’ healthcare major had been misstated right from the year of its initial public offering (IPO) in 2012.

The heart of the ‘NMC problem’ lies in where the $4.5 billion may have disappeared even as $6.6 billion has been borrowed from about 80 banks, local and foreign, – the major lender being Abu Dhabi’s ADCB, while only $2.1 billion has entered the official books of the company.

It was on September 27, 2020, Richard Fleming and Ben Cairns of Alvarez & Marsal were appointed as joint administrators for NMC Group, founded by BR Shetty, and its 35 subsidiaries or group companies in the Abu Dhabi Global Market (ADGM) Courts.

A section of shareholders of the company now ‘smells a rat’ in the very motive (of the perpetrators of the fraud) for the conversion of the largest private sector healthcare player in the country into a pubic shareholding entity about eight years ago through an IPO with much fanfare and thereafter getting listed as a prized stock on London Stock Exchange (LSE).

According to a document released by the Administrators recently, the ‘company under administration’ has already secured a $325 million Administrative Funding Facility (AFF).

It is launching a syndication of AFF for an amount of $65 million on October 12, 2020, which will be closed after 15 days on November 1. The allocation process for the syndication will be done proportionate to the amount of exposure held by the creditors in the unsecured debt.

“Minimum entitlement has been fixed as AED5 million (equivalent to $1.4 million) to receive a firm allocation, whereas maximum allocation to be received can’t exceed 20 per cent of the exposure in the old debt,” the document released by the Administrators said.

Performance surpasses business plan

The Administrators didn’t hide their satisfaction about the healthy performance the company has staged during the year until August 30, having exceeded the business plan targets on many counts including EBIDTA.

While the net revenue at $915.6 million beat the business plan target of $859.3 million marginally by 6.55 per cent, the EBIDTA reported $51.1 million compared with a ‘too-humble’ business plan estimate of negative $10.4 million for the said period. However, these figures were lower than the earlier year figures.

(The above figures are excluding trading, Kenya and India)

Seeking help from DIFC Courts

While addressing the creditors on October 7, the Administrators informed them they will to write this week to DIFC Courts, Dubai’s offshore jurisdiction, seeking their help to recognise the statutory moratorium on NMC loans established by ADGM Court in its jurisdiction.

“One advantage is that the order from the ADGM Court is treated as an order of the Abu Dhabi Court, and hence, this has the benefit of a local order enforceable in Abu Dhabi (onshore).

In fact, this being applicable in the Capital is thus enforceable in other onshore jurisdictions of the UAE,” the administrators explained while briefing on the current status of affairs with NMC restructuring.

So once the DIFC Courts also follow the ADGM regime’s request to recognise the NMC loan moratorium, no creditor or party can continue with any proceedings against NMC Healthcare or enforce any form of security unless permission from Administrators or ADGM is secured.

Investigator’s findings

The investigation team’s probe into the NMC’s financial irregularities so far infers that money and property was misappropriated from NMC; the perpetrators had sought to make NMC liable for the debt it never received or benefited from; and NMC’s losses are likely to be in the region of billions of dollars.

The investigation report is likely to be presented by the year end itself. The Administrators are hopeful that a good deal of funding could be generated by selling non-core assets.

While interacting with the lenders on Wednesday, the Administrators expressed hope that non-core asset could be sold quickly, with firm bids for the Luarmia IVF clinics based in Spain and UK-based private hospitals company Aspen Healthcare expected by as early as next month itself.

“We want to complete this process and deliver the value to you as quickly as possible. We are trying to get to this point in Q1 2021,” Max Frangulov, managing director of Administrators Alvarez & Marsal told lenders.

The Administrators are sanguine about completing either a lender-led restructuring or a sale of the business by the end of April next year.

In case of Exit Sale

Unsecured lenders will receive 100 per cent of the cash proceeds from any sale out of Administration. Such proceeds will be received after $203m of secured debt and the $650m AFF (excluding any capitalised interests) are repaid.

 

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