Dubai: Abu Dhabi-based NMC Health’s immediate future now hinges on whether it can raise a further $250 million in debt.
Now, the question is will UAE and international banks that have run up an exposure of $6 billion plus be willing to add another $250 million.
This comes at a time when a Dubai court has reportedly ordered a freezing of NMC Health’s founder Dr. B.R. Shetty's assets on a request filed by a European bank. This was reported by Financial Times. An Indian court had just weeks ago ordered the freezing of Dr. Shetty's assets in the country, and that was on claims filed by Bank of Baroda.
Dr. Shetty had built NMC Health into the UAE's largest privately-owned healthcare operator. It had a hugely successful listing on London Stock Exchange in 2012, and until mid-December 2019 was riding high. That's when reports came out that the NMC financials were not all in order, internal investigations ensued and led to a series of revelations of corporate excesses, and the running up of debts, of which $4 billion was not even entered into the books.
So, will NMC Health get the new funds?
“UAE banks that have large exposure to the company are likely to finance the debt, as this would help sustain NMC’s business operations which in turn would improve the banks’ chances of recovering part of its outstanding debt,” said Vijay Valecha, Chief Investment Officer at Century Financial.
"The $250 million debt can be referred to as "debtor-in-possession" (DIP) financing, which is a special kind only accessible to companies that have filed for bankruptcy protection under Chapter 11 in the US. It enables the firm to continue or sustain its operations while it navigates from the bankruptcy process."
Falling into administration
It was in April that NMC Health was placed under administration, on a request filed by Abu Dhabi Commercial Bank with the UK high court. ADCB has the highest exposure among banks to NMC Health.
A three-member team from Alvarez & Marsal has since been running the show. One possible move sounded out would be to file for bankruptcy of ‘NMC Health plc’, the UK registered entity.
NMC’s UAE operations have during this period been running fairly smoothly, and it has been at the forefront in combating the coronavirus pandemic.
"The hospital operator is considering to apply for insolvency under the jurisdiction of Abu Dhabi Global Markets (ADGM), which will shield the company from any enforcement from creditors," said Valecha.
"While $250 million debt financing is contingent on ADGM accepting NMC's filing, if NMC does succeed in securing this financing, it lets vendors, suppliers, creditors and customers know that it will be able to remain in business, provide services, and make payments for goods and services during its reorganization.
"If the lender has found that the company is worthy of credit after examining its finances, it stands to reason that the marketplace will come to the same conclusion."
Where's Dr. Shetty?
All through this period, Dr. Shetty has claimed innocence and projected the financial mishandling and misdirection at former top officials in the company. He had repeatedly said that once flights resumed from India after the pandemic, he would take the first opportunity to return to the UAE. But that has not happened… until now.
What did, however, take place is a top employee in the company’s finance department taking the first repatriation flight from the UAE to India along with his entire family.
Most of the senior management associated with running up the $6 billion plus debts are now outside the UAE.