The allegations of mishandling investors’ funds against Abraaj, a firm that has grown to become one of the most trusted private equity names and one of the developing world’s most influential investors, shocked investors and financial institutions triggering distress signals. Hue and cry raised complaints by some investors having ulterior motivation that the Dubai-based Abraaj Group had mishandled their money. The forced firm to file for provisional liquidation in the Cayman Islands. Such a court-supervised provisional liquidation would allow Abraaj to restructure debt, negotiate with creditors and sell assets if needed. It would also allow a moratorium on the holding company’s unsecured claims. The filing would also enable Abraaj to continue talks with possible equity partners for a deal to acquire its fund management operations i.e. excluding the $1 billion healthcare fund which was the subject of allegations. This application had the full support of the Company’s secured creditors who reiterated their desire for provisional liquidators to be appointed to formulate and implement a restructuring of the Company’s liabilities which would be in the best interests of all concerned.
It will be pertinent to note that after the allegations were made public Abraaj promptly hired the internationally renowned auditors KPMG to verify all receipts and payments in the healthcare fund. Abraaj has said that KPMG found no misuse of money and insists that all capital drawn from the fund was for “approved investments” and that unused capital from its health fund was returned to investors.
When the application for provisional liquidation was filed by Abraaj, Sean M. Cleary, Chairman of the Board of Abraaj Holdings said, “This is a defining moment for everyone associated with Abraaj. I want to thank all those who have contributed to building this remarkable firm, and especially the teams that have worked extraordinary hours in dealing with painful challenges over the past five months. Under the auspices of the Court, the situation has now been stabilized, and we can move forward to meet the firm’s commitments and restore confidence in the platform.”
On June 18, 2018 the Cayman Court issued an Order appointing Simon Conway of PwC Corporate Finance and Recovery (Cayman) Limited and Michael Jervis and Mohammed Farzadi of PricewaterhouseCoopers as joint provisional liquidators (JPLs) of Abraaj Holdings. Subject to the final sealed order of the Cayman Court, this will ensure that the rights of all stakeholders can be protected while the Company and the JPLs promote a consensual restructuring of the Company’s obligations. This is quite a success for the Abraaj Group as filling of the voluntary application for provisional liquidation in the Grand Court of Cayman Islands protects stakeholders creditor action against defaults.
An application by Abraaj Investment Management Limited to appoint David Soden and Stuart Sybersma of Deloitte as Joint Provincial liquidators (JPLs) of the fund management business was also duly approved by the Court. These will now enable Abraaj Holdings Limited and Abraaj Investment Management Limited to independently pursue court-supervised restructuring plans in an methodical and orderly manner and for the benefit of their respective creditors. Importantly, the court-supervised restructuring of Abraaj Holdings will have very little impact on the day-to-day operations of the management of the Funds and their portfolio companies.
Expressed satisfaction Arun Reddy, Managing Director of Houlihan Lokey, financial and restructuring advisors to Abraaj Holdings, said “We are pleased to have arrived at this outcome thanks to the strong collaboration and support of key stakeholders. A court-supervised restructuring process will enable the Company to meet its obligations in an orderly fashion and facilitate an efficient and satisfactory sale process of its investments, including Abraaj Investment Management Limited. The Company’s priority has always been, and remains, to ensure the stability of its teams and portfolio, with the intent to maximize value for all parties.”
The JPLs have also been authorised by the Court to take all necessary steps to develop and propose, in consultation with Abraaj Holdings Limited and its advisors, a restructuring of the Company’s obligations. The Court Order granted extensive powers to the JPLs for the protection and management of all assets of Abraaj Holdings. The JPLs also been empowered by the Order to maintain oversight of board and management activities to ensure that the returns to the stakeholders of the Company are maximised. Abraaj Holdings Limited’s secured creditors have assured providing their full support for the joint provisional liquidators to work alongside the Company to formulate and implement a restructuring of the Company’s liabilities as this is in the best interest of all the creditors.
Michael Jervis, Partner Restructuring and Insolvency at PricewaterhouseCoopers (PwC) who is one of the Joint Provisional liquidators appointed in the case of Abraaj Holdings had this to say about his appointment, “Our role as Joint Provisional Liquidators is to manage the restructuring of Abraaj Holdings in an orderly fashion, safeguard the assets of the Company, and ensure that the interests of creditors, employees and broader stakeholders are fully served. The Order by the Court enables the Company to swiftly move into a stable phase of operations whereby restructuring plans and asset disposals can be executed upon in a protected and controlled environment. Given our longstanding experience in global restructuring for financial and corporate institutions, PwC is extremely well placed to deliver a satisfactory outcome for the Company’s constituents and is commencing on this process with immediate effect”.
Arif Naqvi was satisfied that his voluntary application was accepted by the Court, saying, “We are pleased with this outcome and grateful to the Court for its careful consideration of the issues and positive judgment. This Order validates the position consistently maintained by Abraaj that an orderly restructuring, under the guidance of a highly experienced team of Joint Provisional Liquidators, can ensure the outcomes we seek for the Company and its creditors. We are wholly committed to supporting the JPLs through this process and ensuring stability and value maximization for all parties”.
The process of court supervised restructuring is likely to take a few months. Arif Naqvi has pledged to continue supporting this orderly process to ensure that the best possible outcome is possible for all stakeholders. Reflecting on the 16 years since Abraaj Group became reality, one is extremely proud of the positive impact Abraaj has made on the markets and the communities it serves. It is a matter of the greatest satisfaction that instead of going down like BCCI did, Abraaj is fighting back. Perhaps if Agha Hasan Abedi was much younger like Arif Naqvi, BCCI would be the par excellence bank it once was.
