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Abraaj sells major chunk of fund management business

Colony Capital to oversee, on an interim basis, all other group funds

Gulf News

Dubai: Dubai based Abraaj Group on Thursday announced that it has reached agreement with New York-listed Colony Capital, Inc for the sale of Abraaj’s Latin America, Sub Saharan Africa, North Africa and Turkey funds management business and the Group’s Limited Partnership (LP) interests in the underlying funds.

Abraaj Holdings, Abraaj Investment Management Limited (the Group) and Colony Capital, the group’s joint provisional liquidators, PricewaterhouseCoopers and Deloitte, announced that they have reached agreement on the terms for the sale and purchase of the Group’s Latin America, Sub Saharan Africa, North Africa and Turkey Funds management business and the Group’s Limited Partnership interests in the underlying Funds.

Colony Capital has assets under management of $43 billion (Dh158 billion) and manages capital on behalf of its stockholders, as well as institutional and retail investors in private funds, non-traded and traded real estate investment trusts and registered investment companies.

Both the companies have not revealed the value of the deal. The total value of funds sold is more than $2.4 billion. The sold funds include the Abraaj Africa Fund III, which has assets of $990 million, the Abraaj North Africa Fund II with assets of $375 million, the Abraaj Turkey Fund I with $526 million and the Abraaj Latin America Fund II has assets of $545 million.

As part of the deal, staff in the eight offices will be transferred to new owner under the deal. Colony Capital has also agreed to oversee, on an interim basis, other Abraaj group funds that are not being acquired so that the group and all its stakeholders have a comprehensive global solution in place.

Transaction completion

The agreement has received in principle regulatory approval and is expected to close upon approval from the Grand Court of the Cayman Islands as well as other customary consents. The transaction is expected to complete by July 1.

Abraaj Holdings Limited on last Tuesday said the Grand Court of Cayman Islands appointed PwC as provisional liquidator of Abraaj Holdings and Deloitte as provisional liquidators of Abraaj Investment Management Ltd.

“The appointment of the joint provisional liquidators and the start of the process of restructuring this business that we operated across diverse markets is a moment of introspection, but also one of satisfaction, knowing that the teams that have been nurtured over the years and the businesses that we were proud to invest in now have a clearly defined future and a good home that will become the custodians of the next phase of this journey,” said Arif Naqvi, Founder of Abraaj Group.

Abraaj filed for a court-supervised restructuring as it faced allegations of commingling of funds and potential fund misuse and litigations on loan defaults. The move came after some of its investors, including the Bill & Melinda Gates Foundation, commissioned a forensic audit to investigate the alleged mismanagement of money in Abraaj’s $1 billion health care fund.

The company estimated to have more than $13 billion under management is facing legal challenges from investors and creditors that has compounded issues relating to liquidity.

End the speculation

“We are delighted to have crafted this comprehensive global solution for Abraaj and its stakeholders and we sincerely hope that this can enable the process of rebuilding on all sides and also bring an end to the speculation that has swirled around Abraaj over the last months,” said Tom Barrack, Executive Chairman, Colony Capital, Inc.

Despite the reported allegations of mismanagement, none of the auditors have come up with any evidence of misappropriation of funds. Analysts said while some amount of commingling of funds may have happened, it is largely a governance related issue and is unlikely to cause any financial losses to both investors and creditors.

“This is an important milestone towards achieving the overall objectives of the Provisional Liquidation and restructuring as set out in the Court Order. We shall be consulting with our creditors in the coming days on this planned transaction prior to seeking the approval of court,” said Michael Jervis, partner at PricewaterhouseCoopers and joint provisional liquidator of Abraaj Holdings, said.

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