Dubai: Abu Dhabi headquartered NMC Health is all set to sign off on a $250 million debt funding that it desperately needs from UAE banks, according to financial industry sources. The terms of the deal have been agreed, and the funds would come in handy for the hospital operator to meet its medium-term cashflow requirements, including salary payoffs.
But some banking sources say the amount could still be higher.
If the loan programme is confirmed, it would mean that UAE banks are willing to take a longer term view on their exposures to the cash-strapped NMC, which had run up exposures of $6 billion plus to more than 80 institutions, a lot of which was kept off the books until recently. (Another UAE based company, the engineering firm Drake & Scull International, also recently confirmed that it had been making significant progress on its financial restructuring with lender banks)
“NMC’s CEO Michael Davis and Alvarez & Marsal, the NMC administrator, have convinced lenders that the additional $250 million will be critical to survival,” said a banker. “The underlying NMC business is strong – it showed the ability to weather the COVID-19 crisis as well as the devastating fraud that was uncovered just before the pandemic struck.”
It is not confirmed whether it is just one bank that is doing the lending or whether others are involved as well.
Comes with strings attached
Only companies that have filed for bankruptcy protection are allowed to access DIP (debtor-in-possession) financing, and these can tapped for reorganization purposes. “NMC’s $250 million financing is contingent on ADGM (Abu Dhabi Global Market) accepting the company's filing under its jurisdiction,” said Vijay Valecha, Chief Investment Officer at Century Financial.
Informed sources at NMC Health, meanwhile, confirm that “timely” salary payouts are now firmly back on track. In February, just as the extent of its financial obligations were coming to light, NMC ended up delaying salaries by more than two weeks – the first time it had happened in the company’s history.
“A significant amount of work over the past five months and through close cooperation with local banks and insurance companies, NMC completed the July payroll on time and prior to the start of Eid Al Adha holidays,” the official said.
“Everyone right now is fully focused on sustaining the business and the well-being of patients and staff. So much work has been put in since April, when NMC Health was placed under administration, and the administrators and management are finally seeing some light at the end of this tunnel.”
Away from its network of hospitals and clinics, there’s a lot the Alvarez & Marsal team have achieved in recent weeks. Much of the initial attention was focused on NMC Trading, which at its peak represented nearly 30 per cent of NMC’s group turnover. The division was responsible for its retail and distribution operations, and had held the rights for brands such as the skincare label Nivea for decades.
“Most of these rights have been sold to other local groups and in the process netted some funds for NMC,” said a source at a company that picked up one of the brands. “There were some exceptionally strong brands in the NMC Trading portfolio.”
Selling some of the brand rights, in many ways, represent first steps in the dismantling of Dr. B. R. Shetty’s NMC empire, which he had set up in the 1970’s. But sources say that job losses at NMC Trading as a result of these sales were “minimal”. “Most of the workforce was retained by NMC, while others were absorbed by the companies that bought the brand rights,” said a source.
“Actual job losses weren’t that many – that was a huge plus especially in these difficult market circumstances.”
At some point, Alvarez & Marsal will give their blueprint on their plans for the future of NMC and how it can unload the $6 billion plus debt burden it is carrying.
In their interactions with NMC staff over recent months, the administrators have repeatedly underscored their faith in the healthcare services.
Now, if banks provide a medium-term funding of $250 million or over, it would seem the administrators and NMC management have convinced others as well.
Part of the new funds might be used to meet salary payment of its 16,500 employees and other third-party commitments. With the entire world fighting the pandemic, hospital staff have been overburdened and working for extended hours