Dubai: NMC Health getting placed in administration by a UK court order would be the “worst-case scenario” for the company’s future, according to the hospital operator’s Executive Chairman.
“Especially in the current circumstances,” added Faisal Belhoul, who took on the position just over a week ago, after picking up 9 per cent in the beleaguered Abu Dhabi headquartered company.
Coming under administration will lead to “value destruction and will have a significant influence on NMC’s business, stakeholders, and on the company’s ability to efficiently provide its services,” Belhoul said.
“No one will disagree that putting a company through administration is destructive. It is proven by all previous cases.
“To that extent, the logic really implies that all parties will have to sit down together to find a solution - especially in view of the pandemic. We cannot lose focus on that… and NMC’s role in providing its services.”
What being in 'administration' means
This is a situation that all businesses have well-founded reasons to dread. It essentially means that a court and its appointed administrators get to decide how the affected company is managed. The business’s management and shareholders will then have no say in the situation.
The threat of coming under administration is a live one after Abu Dhabi Commercial Bank earlier this week confirmed it had filed a request with a UK court for NMC to be placed under a joint administration. The first hearing is scheduled for April 9. If the court judges in favour of ADCB, it will mean that NMC’s running will come under a court-appointed administrator and not the company’s Board of Directors or management.
ADCB – which has an exposure of Dh3.6 billion to NMC and affiliates - filed its request in a UK court because NMC Health is listed on London Stock Exchange
Prevent it at any cost
This is what Belhoul wants to stave off – and discussions continue with ADCB and other lenders who have a say in the matter. UAE banks’ combined exposure to NMC Health and its previous management is at Dh10 billion plus. (Much of those funds never even entered NMC’s books.)
The April 9 deadline is “putting a lot of pressure of time,” Belhoul said. “We are doing everything possible in our direct communications with ADCB and other creditors to ensure alignment on the future direction of.
“I have come into the Board of Directors with no baggage of the past. And I come with the prerequisites, the experience to deal with businesses of this scale. I do understand the language of the business of lenders.
“I am here to really make things work, not sit to represent one side. That’s really important for lenders to understand - and cooperate - with me.”
Backs to the wall
NMC Health has had a stormy three months, since reports first came out late December that not everything was above board in the way its financials were being reported. Internal investigations were launched and led to the immediate dismissal of Prashanth Manghat, the CEO. There were also departures from the Board of the founder, Dr. B. R. Shetty, and two other principal shareholders.
Ongoing investigations by the company reveal that it now owes more than 80 banks $6.6 billion – that’s $4 billion more than when these audits started. No one so far has a clue as to where the additional funds ended up.
Go easy on debt payments
While Belhoul keeps the channels open with banks on the UK legal tangle, simultaneous discussions are on to get them to agree to a debt payment moratorium, or a standstill agreement. If such a deal is reached, NMC gets more time to shore up its funds and then pay off lenders.
But will banks agree? “I came into this situation with open eyes,” said Belhoul. “I knew there would be lots of different aspects to it. But I do see it as a national obligation… a commitment to support a company of this scale and operating in such a critical sector as healthcare.
“A standstill agreement is a key component of being able to move forward. It requires lenders to be willing to cooperate and give time to the new management to address challenges and stabilize the company. The first priority for us is regain the confidence of the lender community.
“They have all the right to have lost confidence by virtue of what they discovered of the previous management. “
Willing to listen to creditors
It was reported that ADCB wanted a seat on the NMC Board, but still went ahead with filing a case in the UK court. Shouldn’t Belhoul and the new management have been more lenient to creditor demands?
“We had openly communicated that the company recognizes the importance of lenders - as a matter of fact, we recognize them as the most important stakeholder,” he said. “We extended to ADCB all forms of access, including a seat on the Board of Directors.
“And allowing them to be a part of all key tracks, which includes the investigations (into the potential cases of fraud by the previous management.)
“We have so far not received any practical solutions. We hope that over the course of the discussions, there will be feasible solutions from all parties.”
Bring in more money
According to Belhoul, international institutional investors are keen to take an exposure in NMC despite its current predicament.
“This is only my second week… but I already have received offers from institutions willing to invest and support the company and get involved in further negotiations with creditors,” he said. “If anything, it shows the extent of the relationship and credibility that I have with international investors.
“I hope the NMC creditors, especially ADCB, will give me the time to display all those options and engage in productive discussions. That will be the path forward to salvage the NMC business.”
“When any company goes through certain challenges, the question of asset disposal is raised,” said Faisal Belhoul. “But the priority right now is to maintain the business integrity and scale. Moreover, the company may not get the right values given the circumstances it is going through and the state of the overall market.
“All divestment ideas will be evaluated in the future as part of a strategic plan of what should stay and what can go. And definitely, it will not be done without the consent of key stakeholders, including creditors.”