Dubai: The money is in the bank… all $325 million of it. That will be enough for NMC Healthcare to meet short-term payment priorities, including salary obligations for its 13,000 strong workforce and operational expenses.
With the new funds flowing in, the majority coming from ADCB, it also sets a marker for what is going to be an extremely complex corporate revival plan. This could see NMC selling key assets to regain a measure of financial strength and thus be better placed to pay off the debt pile – upwards of $6 billion - accumulated under the previous management.
The $325 million was released as part of NMC Healthcare coming under the mandate of ADGM (Abu Dhabi Global Market earlier this month. (It has been earmarked as ‘Administrative Funding Facility’.)
“The plan could be to sell healthcare assets in the UK and the whole of the Barcelona-based Clinica Eugin’s global assets," said a banker closely associated with the NMC restructuring process. “Both were acquired in recent years. These are financially sound businesses and should get valuations close to what the administrators would be hoping for.”
As per the current schedule, the twin sales could be wrapped up some time by the second quarter of 2021.
An immediate priority
Starting October 12, the administrators of NMC Health will be giving creditors a share in a $65 million syndication. To be eligible, these creditors should not have any ongoing legal action against NMC. If they have already initiated such an action, they will need to agree to a freeze or removal [of] on any actions to be eligible.
The creditors will get a minimum allocation of Dh5 million, while the upper limit must not exceed 20 per cent of their exposure in the old debt.
“This payment to creditors will come as a huge confidence measure for the wider market – because it was only in April that NMC was placed under administration,” said the banker. “To come up with a $65 million syndication release in what continues to such a difficult business environment shows commitment. It will create a lot of positive buzz in the market.”
In the UK, NMC owns Aspen, which operates hospitals and clinics and rated among the Top 5 entities in the private sector. NMC had acquired it in August 2018, for 10 million pounds. This was the phase when the previous management wanted to create an international presence for what had been primarily a UAE focussed enterprise until 2015 or thereabouts. Aspen is conservatively valued at between $70 million to $80 million.
In Spain, NMC acquired a fertility clinic operator - Clinica Eugin - in 2015. More than 50 bidders are in the fray for this particular divestment. A sale would fetch up to $850 million at the top end of the estimates.
“Once these divestments are done, the administrators and NMC management can turn their full attention to strengthening the core operations in the UAE and Oman,” said a healthcare industry source.
For a full exit from administration, NMC creditors have two options – go in for a reorganisation and end up owning the company for two to three years before selling. That would ensure NMC will be better placed operationally and financially, and thus, hopefully, seek a better value.
Or creditors can sell the core business out of the Administration to the highest bidder. But this could mean the stigma of a distress sale and will definitely not aid in creating maximum possible value for the NMC enterprise.
Show them proof
That NMC can still hold its own – despite the shadow of a $6 billion debt mountain and all of the systemic looting that went on in recent years – should count for something. Its performance from recent months gives enough indicators.
The “impact from COVID-19 resulted in higher occupancy but lower revenues due to lower re-imbursement rates compared to standard procedures,” according to an update on the operator’s performance. “Recovery was faster than expected, with revenue performance exceeding business plan and prior year (in August).
In the year to end August, NMC recorded net revenues of $915.6 million as against internal projections of $859.3 million. And earnings before one-offs and restructuring costs were at $51 million, again quite creditable given the operating environment, healthcare sources say.
“The decline in revenue during the COVID-19 heavy months is a result of lower re-imbursement per patient rather than less patients,” according to the update. “The strong revenue recovery post-COVID-19 is being driven by outpatient activity, IVF and cosmetics.”
According to a consultant, “If NMC lenders want their money now, then it could mean they get 15-20 cents to a dollar - that's a fire sale during the pandemic. But if they decide to fund the operations - even if not the expansion - of the business and take a two-thirds stake in the company to ensure the business continuity for 3 years or so, they stand to get much higher value for their investments.
“The underlying business is holding up and the administrators have expressed confidence in the current management under Michael Davis."