Dubai: The Abu Dhabi hospital operator NMC Healthcare expects to emerge from administration by June – if creditors vote in favour of a wholesale restructuring process. This could then turn out to be a defining moment in NMC’s recovery process even as it faces creditor claims of nearly $7 billion.
Currently, 35 out of 36 NMC owned and operated entities are under administration under ADGM (Abu Dhabi Global Market) insolvency regulations. Creditors have until May 28 to vote in favour of the proposal that would result in the “successful restoration of these 35 businesses as going-concerns”.
- April 30: All NMC creditors are expected to submit their claims.
- May 28: Creditors must return their voting decision by this date.
- June: Creditors will be provided with proposals in advance of a meeting to cast a formal vote. The meeting will be held in June.
What does the proposal want?
In effect, the creditors take over ownership of NMC Group, and thus “providing the ability to recover significantly higher returns”. Creditors benefit from the upside in the event of a future exit through an orderly sale process.
The proposal, put together by Alvarez & Marsal, the UK consultancy currently overseeing the NMC administration, also suggests a “robust governance structure to transition the business for a future exit”.
Year-to-date gross revenue for the UAE and Oman is 14% ahead of the business plan, while EBITDA is 129% ahead.
NMC vaccinated a total of 130,000 people and administered 1.3 million COVID-19 PCR tests.
There's a Plan B
If the proposal does not win favour with creditors, that will trigger a “distressed sale” of NMC’s core operations, but on an asset by asset basis. Asset transfers will then happen over a six- to 12-month period.
“Offers received in these circumstances may not be in line with long-term intrinsic value,” the administrators warn.
If the restructuring and distressed asset sale options are not achievable, the NMC Group risks the cessation of operations and with assets sold piecemeal on an accelerated timeframe.
There will be ‘little to no recovery for unsecured lenders.”
Which way will creditors move?
According to informed sources, creditors are certain to vote for the first option. and NMC in its current form should have given them ample confidence that being patient offers them the best chance to recoup their previous exposures.
As it did last year, NMC operationally remains strong going by the first two months of 2021, with revenues of $200 million plus and well ahead of forecasts.
Richard Fleming, Joint Administrator of NMC, said in a statement: “NMC is proving what a strong business it is. The recent outperformance of the business plan reflects this. The launch of the ‘restructuring plan’ and VSA (voting support agreement) is the next step in the process of rescuing 35 of the operating companies and securing the business outside of an administration.”
What Fleming says has got backers. “A majority of creditors don’t see any reason not to press ahead with taking over direct ownership and then get maximum benefit in the mid-term,” said a senior banking industry source.
Plus, the fact that banks make up the bulk of NMC’s obligations - $6.3 billion out of $6.4 billion based on claims to date – could also swing the vote in favour of the longer term option.
But NMC has received bids, reportedly from some of Abu Dhabi’s biggest investment entities. Will that push some of the creditors – especially the influential banks among them – to think in that direction?
By May 28, the picture could become clearer.