Dubai: Abu Dhabi headquartered NMC Health will come under administration. This means that a UK Court appointed administrator will oversee the immediate future of the troubled hospital operator.
This follows breakdown in talks between NMC's new management and ADCB, the bank which has got exposures Dh3.6 billion with it.
In a statement late on Wednesday, Faisal Belhoul, newly appointed Executive Chairman of NMC, said: “The Board of NMC Health has written to the [UK] court indicating that, notwithstanding strenuous efforts to address creditors’ concerns, it has not been able to secure their alignment and support and has been advised by its counsel that it is not in a position to oppose the application.
"Accordingly, the board expects the company to be placed into administration in due course."
ADCB sets the ball rolling
It was early this week that ADCB, the bank with the highest exposure to NMC, filed an appeal in the UK court for NMC to be placed under a court-appointed administrator. This effectively would mean that the NMC management would have no say in the running of the business or how it would take care of its $6.6 billion in loans to banks, both local and international.
The first hearing is to take place on Thursday (April 9).
Over the last three days, Faisal Belhoul was in talks with ADCB and other lenders to come up with a solution that would not see NMC come under court supervision. The immediate priority was to get ADCB to pull back on the appeal with the UK court.
That, as Belhoul’s statement late on Wednesday indicates, did not materialize.
“In light of this decision, banks and creditors involved in the administration process have a clear and pressing duty to extend credit lines and ensure that the company has the necessary liquidity to maintain healthcare operations and must continue to support the salaries of thousands of healthcare workers at this time,” Belhoul added.
A $6.6 billion dollar question
No one doubts that NMC operationally continues to be sound, more so at this dire time, with the entire attention of the nation and its healthcare industry combating the COVID-19 pandemic.
Will banks now offer NMC the credit line to take care of salary obligations as well as payments to suppliers? The February salary release was delayed up until mid-March, but March payments proceeded as per schedule, according to market sources.
But with NMC carrying debts of $6.6 billion, banks wanted to have a say... and the way they wanted to do it was to get the company under administration.
Belhoul is setting out a marker - he insists that the current management should be retained to see through the next few difficult weeks.
“The continuity of the executive leadership must also be maintained - this measure will ensure that the highest operating standards and quality of care continue to be delivered in this time of great need," he said. "And increase the chances that our hardworking doctors and healthcare professionals on the front-line have the supplies they need and are fully supported in their duties."
Start a new chapter
But will the new administrators think along the same lines? “In view of the fact that the appointment of joint administrators is inevitable tomorrow , the Board [at NMC] will lose its power to manage as they see fit,” said Joseph Wazzan, Head of Corporate Finance & Restructuring at Synergate.
“And the Administrators will quickly mobilize their own people to take over the management and begin to their work of analyzing the position. This process will take some time.
“With the passage of time and the uncertainty brought about by the recent events, the value of the group will continue to diminish and its ability to continue as a going concern will be severely affected.”
Think the unthinkable?
Some market watchers say that NMC’s many prized assets could be sold off to generate money for the lender, including ADCB. UAE banks combined have an exposure of Dh10 billion plus to NMC – much of the funds never even figured in the NMC’s accounts until the past few weeks.
How the previous management/ex Board member managed to walk away with billions of dollars in banks loans made to a company is as yet unknown. No formal charges have been brought against any member of the previous management or Board until now.
But Belhoul in an interview on Monday had said investigations will be pursued, both in the UAE and the UK. Unfortunately, most of the former members of the management are no longer in the country.
But banking industry sources say that fast-tracking the legal option was the only way they could get to have some say in the future of NMC. “And it’s our money that’s at stake,” said a banker at one of the affected banks.
"The slow pace of investigations being carried out by NMC was not helping."
What next?
According to Wazzan, one way to ensure NMC has a future is to create a brand “new company”.
This would be “with funding from potential investors who will acquire the goodwill and assets at arm’s length independent valuation and kickstart the business again with a clean sheet,” he said.
“The purchase consideration could be partly financed by rolling forward part of the existing debt to the new company. The purchase consideration together with the realization of the assets that have not been acquired (such as receivables) will be utilized by the [court-appointed] administrators to pay off creditors in accordance with the law.”
Fall from grace
For NMC, the face of private healthcare in the UAE, this is indeed a steep fall from lofty heights. Until the last week of December, it was as if it could do no wrong.
The stock was one of the standout performers on the London Stock Exchange, and NMC was expected to announce another bumper set of results for 2019.
But then came the crash – an US investment firm Muddy Waters said NMC’s books were not as transparent as it seems. Since then, the stock and the company has been in a freefall, with each week seeing new revelations of the previous management playing with the books. The stock dropped 90 per cent before it’s trading, thankfully, was stopped.
Where is Dr. B.R. Shetty?
The founder of NMC Health, the Indian billionaire Dr. B.R. Shetty, is still reportedly in India. He had stepped down as chairman after the Muddy Waters’ reveal came out and NMC’s previous management launched an international investigation.
Will he still have a role to play in any future being scripted by UK court and ts appointed administrators?
No one has an answer to that one right now.
Focus on need of the hour
Belhoul, for one, is only thinking about the immediate future.
"Realizing regrettably that administration has become a certain outcome, I must now underscore that it is critical that the administration process is conducted quickly and smoothly," the Executive Chairman said. "With the core objective of keeping the organisation stable and in a position to provide vital medical care to support the people, the government and the nation of the UAE during the COVID-19 pandemic."
