Arif Naqvi Image Credit: Atiq-Ur-Rehman/Gulf News Archives

Dubai: Arif Naqvi, the founder of beleaguered private equity firm Abraaj, has resigned from the board of directors of Air Arabia, according to a statement filed by the airline on the Dubai Financial Market (DFM) on Sunday.

According to the statement, the board discussed Naqvi’s resignation at meeting held on August 9. The board will nominate a replacing member within the coming weeks, the statement added.

In mid-June, the Sharjah-based airline had disclose that it had $336 million (Dh1.2 billion) invested in Abraaj funds but said its exposure to the embattled group would not impact its operations. Air Arabia’s exposure to Abraaj was through fund portfolios and short-term investments.

Abraaj’s troubles began with investors — including the Bill & Melinda Gates Foundation and the International Finance Corp — making allegations of commingling and mishandling of their money in a $1 billion health care fund.

Faced with liquidity crunch and mounting debt burden, Abraaj filed for liquidation of its fund management business. The company, which has an estimated $13 billion-plus assets under management, is facing legal challenges from investors and creditors.

With the liquidation process under way in the Cayman Islands and attempts to sell its fund management not seeing results, investors in various funds are seeking legal help in recovering their money invested in Abraaj-managed funds or lent to the parent company as loans.

The private equity firm is undergoing a court-supervised restructuring after it was found to have borrowed money from some of its own funds to meet operating expenses without investors’ consent.

Abraaj has an estimated debt of more than $1 billion it owes to private creditors and banks. The settlement of these debts hinges on the company’s ability to complete sale of assets through the court-appointed liquidators Deloitte LLP and PricewaterhouseCoopers LLP.

Large creditors include Hamid Jafar, founder of Shajah-based Crescent Group, who lent Abraaj about $300 million, as well as Dubai-based banks Mashreqbank and Noor Bank, Commercial Bank of Dubai and Emirates NBD. The total exposure of UAE-listed companies in Abraaj, including loans and investments, stands at an estimated $2.5 billion.

Bounced cheques

While most creditors are still in the process of taking legal action against Abraaj, Naqvi is facing a bounced cheque case in Sharjah relating to a $217 million (Dh798 million) cheque issued to Hamid Jafar. A Sharjah court is set to hear the case on August 14.

The new case comes after a similar case relating to a bounced cheque of $300 million that was settled out of court on July 15.

Last month, the public prosecutor’s office in Sharjah issued a warrant of arrest against Naqvi and the case was heard by a Sharjah court before it was dismissed following an ‘agreement’ reached by both parties to settle it out of court on mutually agreed terms.

While Naqvi is out of the country, in the bounced cheque case he is represented by Dr Habib Al Mulla, executive chairman at Baker McKenzie Habib Al Mulla, while Hamid Jafar is represented by Essam Al Tamimi, Senior Partner at Al Tamimi & Co.