Dubai: Creditors have taken control of NMC Healthcare as direct stakeholders in the latest turnaround point for the UAE’s largest private hospital operator. What this means is that creditors have swapped their debt exposure for direct equity in the company.
This will likely mean that they will see the company through the next two to three years rather than go in for any immediate sale, according to market sources. So, what this means is that the company set up by Dr. B.R. Shetty in the mid-1970’s and then built up as the largest private healthcare company in the UAE – and in the region – is finally seeing a change in shareholders. These shareholders have had exposures of over $4 billion in the company and faced a stark choice – try and sell the company immediately and get whatever they could.
Or hold on until the current administration saw the company through the next year or two and improve its chances with a new buyer. So, these creditors turned shareholders will work with NMC's current management to come up with a plan to see the company emerge stronger - which will be through a sale of its UAE and Oman operations.
"This conversion buys time for the entire process - it shows NMC creditors believe in the ongoing turnaround story" said a banker. "And they are prepared to wait for a return on their past lending to the company."
How was this done?
"A conversion in the from debt to equity arrests the drain on NMC cashflows while simultaneously allowing the creditors any upside that results from an eventual restructuring," said a source closely associated with the process. "This is either through a sale and/or a listing on the capital markets."
The current administrators of NMC Group have received creditor commitments that will "ensure the successful exit of the Group from ADGM administration, with the creditors becoming the equity holders of the NMC business under deeds of company arrangement".
The transition at NMC will be a landmark moment in UAE’s corporate restructuring legacy. And offer a direction as how other entities finding themselves under administration could find a way out.
All through the process - from NMC being placed under administration to now – Shetty has been relegated to the sideline, literally. He’s been stuck in India since early last year, and recent attempts to fly back to the UAE were stymied by Indian courts.
NMC operationally continues to do well, having navigated its way through all the turmoil of 2020 with a solid set of numbers. As to the missing billions from NMC’s books, that’s a process still going on.
Investigations have narrowed down to top shareholders and former management figures. Banking sources say that the NMC’s court-appointed administrators Alvarez & Marsal have made huge progress in putting together the forensic trail of how the billions got channelled out.