Dubai: "Dissolution” or “liquidation” of NMC Health are the most likely exit strategies before the UK High Court appointed administrators, a document issued by them state bluntly.
“We consider it prudent to retain all the options available to us,” the statement notes.
“This will be dependent on dividend prospects and/or whether a liquidator would be required to pursue certain legal actions… or take other action within a liquidation process.
“At this early stage, until all investigations are progressed and the liability position of the Company is established, it is not possible to conclude which exit route will be most appropriate for the administration. A further update on this matter will be provided in due course.”
Thought was given to "rescuing the Company as a going concern" - "however, in view of the situation identified since our appointment, including the potential for a significant value of guarantees to have been provided by the Company, it is not now considered capable of being achieved."
How is Liquidation different from Dissolution?
With liquidation, the shareholders receive some proceeds from the selling of assets and creditors paid off.
With dissolution, the shareholders do not have any say in the proceeds generated from asset stripping.
NMC's Trading division will be put up for sale soon. Following that, the best performing hospitals and clinics could be sold piecemeal. Multiple sources have confirmed that senior doctors and consultants at a couple of hospitals have been made redundant.
No official confirmation has been had on this point.
Hard at work
The update on what NMC's future could be comes after three consultants from Alvarez & Marsal, a turnaround specialist, were appointed by a UK Court in early April. This followed a submission from ADCB Bank, the UAE entity with the highest exposure to NMC Health, that the hospital operator be placed in “joint administration”.
The administrators had since April 10/11 initiated a series of meetings with NMC’s lenders and other stakeholders to come with a strategy that would see the recovery of some of the $6.6 billion NMC owes banks.
According to a banker who has been associated with the whole NMC saga, “This is an interim report after three weeks of working with CEO Michael Davis on the ground. Their "ongoing strategy" is two-fold
“To preserve valuable shareholdings of the company with a view to realising value in due course; and
“To continue to investigate the affairs of the company and the group to pursue recovery of value.”
Investigations at full throttle
Criminal complaints had been brought in Abu Dhabi by ADCB against six officials, including shareholders. The names include Dr. B.R. Shetty, founder and former chairman, and also a former CEO.
“Our investigations to date has been designed to ensure that we can build a comprehensive picture of the Company's position,” the Administrators’ report notes.
“In light of the reports of undisclosed borrowing and suspected fraud, this will require utilising its own records, those of the Group and a number of parties, including banks, advisers, connected parties and third parties across multiple jurisdictions.
“It is clear the scope of the investigation needs to cover a number of years - and therefore a substantial amount of data and information is required to be reviewed. This includes very large volumes of accounting entries, some hundreds of thousands, and many Company, Group and third-party documents. These tasks are substantial and the level of work necessary will continue to be extensive.
“At this point in our work, given the uncertainty of what we might find, it is not possible to provide an accurate prediction of the time and cost required to complete the investigation. However, it should be expected to require significant resource over a period of time.
“The investigations which will be extensive are at an early stage and we do not want to prejudice the outcome of any investigation by commenting further at this stage.”
The last week or so has provided further clarity that Dr. B.R. Shetty will not be playing any role in deciding NMC’s future.
Caught up in legal issues in India, related to exposures clocked up from Bank of Baroda, it’s highly unlikely Dr. Shetty will be back in the UAE any time soon, banker sources say, especially after a court in India froze his assets.
“Dr. Shetty will need to address his issues in India first – even if flights to the UAE resume soon,” said one banker.
(Meanwhile, UAE banks and Bank of Baroda are trying to sort out problems at NeoPharma, the pharma company 100 per cent owned by Dr. Shetty. Production has dropped significantly, and its generic medicines are no longer available in the market. Whether any investor would want to come in now into NeoPharma or acquire its assets is a question bankers are keen to find out.)
"The decision in respect of [London Stock Exchange listed] plc will not be made until some point in the future - it could be years away. However, at this point it appears that the most likely resolution will either be dissolution or liquidation of the plc.
"That is obviously dependent on dividend prospects once realisations and the associated costs of the administration have been taken into account, as well as whether certain actions, legal or otherwise, would be required within a liquidation process.
"This resolution, if pursued, would apply only to the "Holding Company" and not to the operating companies of the wider Group which continue to trade as normal. The primary objective of the Administrators remains unchanged: to ensure the continuity of patient care, stability for staff and suppliers, protection of its assets and immediate financial security for NMC’s operating companies.”