NMC Health
Coming under ADGM Court's jurisdiction is a defining moment in NMC Health's future revival plans. Image Credit: Gulf News

Dubai: The restructuring consultancy Alvarez & Marsal has been named administrators of more than 30 operating businesses coming under Abu Dhabi-based NMC Healthcare. This was done after an extended hearing by a senior judge of Abu Dhabi Global Market (ADGM) Courts.

It will allow the healthcare group to secure an additional $325 million financing facility, while "protecting the 36 businesses from creditor action". (The latest appointment does not apply to NMC Healthcare’s businesses outside of the UAE.)

See More

As per the Court order, the current NMC management team will retain operational control of the hospitals and clinics, while the administrators - Richard Fleming and Ben Cairns of A&M - will handle the financial restructuring.  The process to shift control of NMC’s administration to an Abu Dhabi jurisdiction is thus a major step. 

Ahead of the order, there were two options in front of the administrators and all of NMC's creditors - start selling off non-core assets immediately and rebuild NMC as a hospital and spciality clinic operator. But if the turnaround plan did not get an approval, it would mean even core assets - such as individual hospitals and other prime assets - will get sold off from January onwards.

Obviously, the first option is what would be termed as ideal under the circumstances. All through the pandemic months, NMC and its network proved its mettle as a frontline organisation in the battle against COVID-19. As per current forecasts, NMC's EBITDA (earnings before interest, tax, depreciation and amortisation) could total $162.8 million in 2021 and $212 million in 2022.

Some maneuver room

In a statement, Michael Davis, acting CEO and Chief Operating Officer of NMC Healthcare, said: "This is a positive next step in NMC’s restructuring, allowing us to address the financial challenges we’ve faced since the fraud was uncovered earlier this year."

The Abu Dhabi headquartered hospital operator and its other group entities was formally placed under administrator by the UK High Court in April. This was on an appeal filed before that court by Abu Dhabi Commercial Bank, which has the highest loan exposure to NMC.

The shift to an ADGM Court jurisdiction thus shifts all of the action to Abu Dhabi. “The ADGM Court follows common law practice, and what this essentially does is ensure all creditors of NMC comply with the judgements passed on by it.” Apart from what it means for NMC’s future specifically, it also sets up a high-profile role for ADGM and of its Court, and that in itself is a landmark in UAE’s corporate annals. 

The UK Court appointed administrators together with the current NMC management have cobbled together a corporate turnaround programme, which could see part of the heavy debt burden NMC carried to be converted into equity. (NMC's overall debt is upwards of $6 billion, much of which was "officially" added to the books earlier this year.)

Consolidate the process

All future ADGM Court rulings will supersede any judgements passed by any other court on NMC issues. It also effectively means that all creditors will abide by ADGM’s edicts on the issue.

“The core issues surrounding NMC is at heart an Abu Dhabi or UAE issue,” said a banker with exposure to NMC. “Shifting the administration of NMC under a UAE court will simplify legal processes and decisions that will be taken to pay off banks/creditors and set a future course for NMC.”

Catching the perpetrators
Trying to get back the billions of dollars siphoned by the previous NMC management is not going to be easy. In a best-case scenario, claims against "wrongdoers" are expected to take more than two years to achieve and potentially in excess of five years in some areas.

Debt for equity

In its turnaround plan, the administrators – Alvarez & Marsal – has proposed to offer NMC creditors up to 67 per cent equity in lieu of debt. Under the ADGM process, NMC has until January 30, 2021 to deliver an agreed plan of reorganization. If that does not come about, NMC must use its backup plan to sell "core assets".

But divesting NMC's "non-core assets" can still continue during the ADGM mandate process. (NMC's trading division with its skincare product licenses has already seen some divestments.)

Need for cash
Once it gets approval from ADGM Court, the administrators will ask the Court to allow NMC to obtain credit - or incur debt - under a funding arrangement underwritten by Abu Dhabi Commercial Bank, Sculptor Capital Investments, Emirates Islamic Bank and HSBC Bank Middle East Ltd.
These funds will also be needed to pay off salary obligations.