NMC Royal
All of NMC Health's operations will be supervised by Uk court appointees. Image Credit: Gulf News Archive

Dubai: Abu Dhabi based NMC Health has been placed under the UK court's supervision. The court will now appoint administrators to oversee the whole management and operations of the UAE's largest healthcare operator.

The existing Board of Directors of NMC "cease to have decision-making powers with immediate effect". These powers transfer to the Administrators who are responsible for the day-to-day running of NMC.

But "all hospitals, medical centres, care facilities and other operations in the group are not subject to the administration procedure - so their current activities will not change," a statement issued Thursday confirmed. 

A court in the UK came into the picture because NMC Health is listed on London Stock Exchange, and thus bound by UK rules governing public companies. It listed on the LSE in 2012.

This follows an appeal filed by ADCB with the UK court for “joint administration” of NMC Health, after it was found that the hospital operator had $6.6 billion in bank debt and was in no position to pay it off.

UAE banks combined have exposures of Dh10 billion plus, with ADCB having the highest at Dh3.6 billion.

In a statement after the UK court ruled in favour, ADCB issued a statement: “ADCB and other key creditors have concluded that an administration process is the most suitable route to ensure a rescue and turnaround of NMC Health PLC and its subsidiaries.

“And to assure continuity of operations for patients, healthcare workers and other stakeholders. An administration is a process designed for a rapid business recovery and is therefore distinct from liquidation.

"The true picture of the financial difficulties faced by NMC only became apparent through a series of announcements by the Company since February 2020, including the uncovering of over $4 billion of previously undisclosed debts," ADCB said in a statement immediately after the UK court order.

"Contrary to the information the Group provided to ADCB and in breach of the various loan covenants and commitments, following these revelations, the Bank learned that it was among over 80 major regional and international financial institutions that extended credit to the Group."

Not on, but…

This position was contested by Faisal Belhoul, who had taken over as Executive Chairman, less than two weeks ago at NMC Health. He had said repeatedly these past few days that a company getting placed under administration would lead to value destruction.

But with new revelation of NMC’s overall perilous debt position. There were few takers among the banks to take up Belhoul’s position.

Even then, efforts were on until Wednesday to try and get ADCB to change its mind on joint administration. But late on Wednesday, Belhoul threw in the towel, stating that with no deal likely with ADCB, being placed under administration was the only option.

Faisal Belhoul
Faisal Belhoul, only recently confirmed as Executive Chairman, was willing to do whatever it takes to turn around NMC. But having the company under administration was not something he wanted. Belhoul will still have a decisive role to play, with his 9% stake. Image Credit: Gulf News Archive
Enter the Administrator
Who will be the NMC administrators?

The UK court has appointed personnel from turnaround advisory firm Alvarez & Marsal to take “immediate control”. The firm will work on behalf of all stakeholders.

“Their priority is to ensure stability and the continuation of uninterrupted healthcare services at the Group’s medical facilities,” ADCB said in a statement. “The joint administrators are also tasked with implementing robust governance, conducting a full, transparent investigation into suspected previous irregular financial activity and taking adequate steps to initiate the recovery of any missing assets and funds.”
No more of the patient approach. ADCB wanted to ratchet up the legal options, and getting the UK court involved was the most logical step in that direction. Image Credit: Gulf News Archive

Expose them

ADCB’s stance on the subject was made clear in Thursday’s statement – “This proactive approach to place the Group in administration was taken in response to recent developments, including the revelation of previously undisclosed liabilities of over $4 billion, which suggests a significant risk of insolvency.

“NMC may have concealed material information from creditors, shareholders, rating agencies and regulators. It also recently disclosed suspected fraudulent activity, which has impacted the Group’s financial position and the interests of ADCB and other key stakeholders.”

Fraud, insolvency

That ADCB takes up the two words – fraud and insolvency – in the same statement shows the stance it is going to take. Banks may have started losing their patience with the gradual pace that internal investigations were taking place at NMC. (The investigations were announced well before Belhoul came into the picture by taking 9 per cent stake through one of his investment vehicles.)

Asset stripping and more?

With NMC in administration, will the focus be on trying to sell off those assets that are deemed as non-core and retain the hospitals and other healthcare services? In recent years, NMC had expanded into territories outside of the UAE, and had also made a string of high-profile acquisitions. (Some of these purchases were made paying “top-dollar” and far above their market value at the time, according to some bankers in the know.)

NMC currently has a staff strength of 15,000 plus across its network. Will there be a reduction in these staff numbers at some point is a question that is there on everyone’s minds. So far, NMC has managed to retain its core workforce of doctors, nurses and other key personnel.

Words of reassurance

ADCB was quick to make its stance clear on what next. "The Bank has committed to extend short-term working capital facilities to the Company when the joint administrators commence their work," the statement said. 

"ADCB would like to express its appreciation for the Group’s doctors, nurses and other critical care providers and employees, who are working tirelessly to serve local communities in challenging circumstances. The Bank will continue to coordinate with other creditors to support NMC at this critical time for the Group, its employees and patients."

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NMC as a pioneer

Since its set up in the mid-1970s, NMC established its credentials as a key private healthcare business. Through the 1990s and the last decade, it cemented that position through a series of expansion, including multiple speciality hospitals in Dubai and Abu Dhabi.

It now has 194 medical facilities across 19 countries, according to the ADCB statement and has touched the “lives of the majority of UAE residents”.

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Abu Dhabi based billionaire Dr. B.R. Shetty was the founder of NMC Health and UAE Exchange House, two powerhouses in their respective categories. Both entities are now under investigation. Image Credit: Gulf News Archive

NMC was also the flagship around which Dr. B.R. Shetty built up a business empire in the UAE and elsewhere. Now, with NMC going into administration – and a step away from full-scale insolvency – the UAE arm of that empire is in relative tatters.

The other arm, UAE Exchange Centre, is also under investigation, this time by UAE Central Bank.

And it only took three months and 15 days for the whole edifice to crack. 

Dr. B.R. Shetty outlines his plans
“Out of respect for due process and to allow the various investigations to quickly and independently undertake their mandates, I have refrained, to date, from making any extensive public statements.

However, as I’ve said previously, I am carefully undertaking my own investigations of the information available to me, and I will make these findings known as soon as possible, and in the proper and appropriate manner.

I am extremely eager and determined to bring to light the full facts, and the whole truth, around what has transpired to all stakeholders as quickly as possible. This is especially urgent in order to bring much needed support and reassurance to the thousands of dedicated doctors, nurses and healthcare workers of NMC Health, and in light of the current public health crisis."

- Anjana Kumar, Chief Reporter
Break up of ADCB’s exposure to NMC
* ADCB provided credit facilities to various entities in the NMC Group. Following the three-way merger in May 2019, total credit exposure of $981 million to NMC was made up of $767 million in facilities extended by ADCB, $147 million by the former Union National Bank and $67 million by Al Hilal Bank.

* ADCB has “never provided unsecured loans to NMC’s principal shareholders,” it said in a statement.

"The Bank’s assessment of NMC was based on financial statements published by the Group, which were audited as a listed company since 2012. The information available to ADCB, including half-year financial statements released in August 2019, showed a profitable business with healthy cashflows, a comfortable debt position and strong fundamentals, operating in markets displaying strong growth in demand for healthcare."