Being placed in a court order joint administration will not serve desired purpose, says NMC Health in a rejoinder to ADCB move. Image Credit: Gulf News Archive

Dubai: NMC Health has upped its resistance to be placed under administration – as had been demanded by Abu Dhabi Commercial Bank in a submission to the UK High Court.

The Abu Dhabi headquartered healthcare operator said it was in discussions to have that application withdrawn and to “avoid the appointment of administrators, which it does not believe would be in the interests of stakeholders as a whole,” NMC Health said in a statement on London Stock Exchange, where it is listed.

“The resolution is likely to involve material changes to corporate governance of the group and the composition of the Board itself.”

Belhoul will need to move fast to strike a possible understanding with ADCB – the UK High Court has set April 9 for the first hearing.

Aim for a standstill

In the last 48 hours, Faisal Belhoul, who took over as Executive Chairman after picking up a 9 per cent stake in NMC Health, has been vociferous on the need for lender banks to show some leniency and agree to a “standstill” agreement, which essentially means to defer payment of dues to the banks.

But during this period, banks have upped the ante, with UAE banks’ combined exposure to the hospital operator at Dj10 billion plus. Among them, ADCB has been particularly aggressive in pushing the case forward, culminating in the request made to the UK courts for “joint administration” of NMC Health. (The reason why the UK courts was approached is because of the company being listed in London.)

ADCB has reasons to be aggressive in chasing owed funds – its total exposure to NMC is at Dh3.6 billion, by far the biggest chunk of the exposures by UAE banks.

Other local banks too have been issuing statements about their exposure, including those made out to UAE Exchange Centre parent company Finablr. (UAE Exchange itself is now under Central Bank oversight and all its branches have ceased operations. And to this day, there are customers who are yet to see funds sent through UAE Exchange reach the intended recipient or account. Some of these transactions were done as late as February.)

ADCB raises the stakes with NMC Health
• Lawyers acting for Abu Dhabi Commercial Bank filed an application dated April 2 with the High Court of Justice, Business and Property Courts of England and Wales, Insolvency and Companies List.
• Their plea was for the appointment of administrators to oversee NMC Health under paragraph 12(1)(c) of Schedule B1 to the Insolvency Act 1986.
• A hearing has been scheduled for April 9.

Why would ‘being in administration’ matter so much?

Being deemed “in administration” means the company is insolvent and can only function with the help of qualified outside support, be it operationally or in the financial management.

It’s understandable why Belhoul would want to prevent such an outcome – it would severely undermine the flexibility he will need to get things moving the way he wants it, be it in asset disposal or any detail. Such moves will need to have the express approval of the administrator, and by extension that of the lender banks.

As it is, lender banks are tightening the flow of funds to NMC Health – payments from insurers for treating patients are stuck with the banks. It was only the release of funds by Daman, the Abu Dhabi headquartered health insurer, directly to NMC that helped pay off the February salary.

Options for a turnaround

Selling off some assets within the NMC Health Group’s portfolio would be the obvious way to get some cash flowing in.

But in the current market, will any asset sale fetch the intended sums? That’s the dilemma Belhoul will have to contend with… apart from the more immediate one of trying to seek an understanding with ADCB and others.