Former CEO NMC Health Manghat
CEO of NMC Health, Prasanth Manghat, has been dismissed in late February. His role was taken over by the current Chief Operating Officer, Michael Davis, in an interim capacity. Image Credit: Archives

Dubai: As of March 10, NMC Health paid the February salaries for all of its 16,500-strong staff at the UAE operations. But that’s only going to be a partial relief for the Abu Dhabi-headquartered hospital operator.

NMC Health late on Tuesday issued a statement on London Stock Exchange — where it is listed — that the size of its debts now amounts to “around $5 billion” — that’s $2.7 billion more than was reported earlier.

NMC Image Credit: File photo

This revelation will come as a shock to potential buyers of the troubled company. They reportedly include Abu Dhabi’s investment giant Mubadala, Hussain Sajwani, Chairman of Damac, and another prominent Dubai-based business group.

"A $5 billion debt burden on the books could put a pause on any buyer ambitions to acquire NMC Health," said a banker source. “It’s becoming more and more clear that NMC’s future health requires government intervention rather than just a straight-forward buyout.

“Taking on the responsibility for a further $2.7 billion in debts can be hugely detrimental to a new buyer.”

Banks put the squeeze

Meanwhile, NMC will require all the help it can get to keep meeting its future salary and other third-party commitments. Lender banks - and it includes some of the biggest names in the UAE - are tightening up their exposures to the healthcare operator.

It was only because Abu Dhabi based health insurer Daman chipped in at the last minute that the February wages were cleared. Even then, it had to be paid off in three stages. But all other insurer payments meant for NMC are now stuck with the banks.

Top NMC officials are now negotiating with banks to get these funds cleared and arrive at some sort of a deal to postpone paying off the debts. It’s clear that NMC’s survival hinges on the outcome of this.

But Tuesday’s big reveal of a further $2.7 billion that needs to be paid off on top of the already publicly known $2.1 billion will make matters a lot harder.

“The new (interim) CEO, Michael Davis, is literally having to take on new problems even as he tries to resolve old ones,” said a source with a long association with NMC. “Clearly, he will need some help.”

NMC Royal Hospital
One of NMC's prized assets - the Royal Hospital in Abu Dhabi. During the last three years, the company increased its reach across the country through acquisitions and greenfield projects.. Image Credit: Gulf News Archive

Sending out an SOS

NMC sources say that channels are being kept open to come up with a temporary solution. "We only need some time to come to grips with the problem," the source said.

"ll the hospitals are functioning to capacity... we have had solid numbers for January and February, and March is looking just as busy.

"But we need to get our hands on the funds generated to make it work. Staff will require assurances of being paid on time. This is where we will need help from the authorities and lenders.

"We are hopeful the local bodies, regulators and, perhaps, the government would surely come up with assistance... that has not happened yet. The doctors and staff remain committed to serving our patients, and the CEO, Michael Davis, is squarely focussed in seeking solutions to salvage — and restructure — the company."

All eyes on the government

Healthcare industry sources say that NMC’s reach across the UAE will convince the government to come up with some sort of package — or turnaround strategy.

Priority No. 1: Come up with a “standstill” agreement with the banks on debt repayments.

Also, NMC will need all the support from local health insurers to ensure it continues to have the same level of patients coming to its facilities.

Any move by even a few insurers to “divert” care seekers to other healthcare providers could be detrimental to NMC’s long-term health.

“We still believe we have the size, scale and expertise to get government support at this critical time,” said a senior official. “Our global operations and experience in specialist streams such as IVF and long-term care makes us an integral part of the UAE.”

Hopefully, NMC’s bankers, potential buyers, and the government will be thinking along the same lines.

The $2.7 billion ‘hole’
On June 30, 2019, NMC Health had $2.1 billion as debt on its books, loaned by some of the biggest banks in the UAE.
On March 10, 2020, the company said it was “informed” of another $2.7 billion in debts, following an audit done by Moelis. This was as much of a news to NMC’s current management as to anyone outside of the company.
Here’s why - “The Company (NMC Health) has identified over $2.7 billion in facilities that had previously not been disclosed to or approved by the Board,” it said in a statement on LSE.
“The Board believes that some proceeds may have been utilised for non-Group purposes.”