Dubai: The sale of Abraaj’s Latin America, Sub Saharan Africa, North Africa and Turkey funds management business New York-listed Colony Capital in a short frame of time has come as a big relief to all stakeholders including investors, employees and creditors.

“We are pleased to have agreed to a sale of certain of AIML’s business units and assets in such a short time frame, allowing, in line with our restructuring mandate, for these business units to continue to trade and ensuring continuity of service to investors and employment for the members of staff employed in these regions. The next step is to seek sanction of the Cayman Islands Court for the transaction, which will be undertaken on an expedited basis,” said Stuart Sybersma, Partner at Deloitte and Joint Provisional Liquidator of Abraaj Investment Management Limited.

The sale of significant number of funds to Colony Capital follows allegations of fund mismanagement and commingling of funds by some investors. A few months ago investors, including the Bill & Melinda Gates Foundation, commissioned an audit to investigate the alleged mismanagement of money in Abraaj’s 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 its liquidity.

Among the various litigations, the most prominent are the cases filed by Kuwait’s Public Institution for Social Security earlier this month ion for the liquidation and winding up of Abraaj Holdings after it defaulted on a $100 million (Dh367 million) loan. A second creditor, Auctus Fund Ltd, also filed a petition in the Cayman Islands.

Reduce concerns

In addition to the concerns raised by the unsecured lenders, a group of institutional lenders led by some of the leading international and UAE banks have secured loan exposures to the company.

The quick start to the restructuring process is widely seen to reduce concerns relating to loan defaults, losses to investors and large scale job losses.

“This [sale of funds] 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 before seeking the approval of court,” Michael Jervis, Partner at PricewaterhouseCoopers and Joint Provisional Liquidator of Abraaj Holdings.

Private equity industry representatives said the quick resolution of issues relating to Abraaj is very important for the regional private equity industry. “Fund raising in this industry is very sensitive to the perception of investors. The issues relating to Abraaj has drawn a lot of attention and it is likely to take some time for the industry to gain the much need trust from investors. especially of large limited partners (LPs),” said the CEO of a regional private equity firm.

Reputational damage

Industry representatives in general said quick settlement of issues with investors and creditors will limit the reputational damage to the industry.

Abraaj management is also optimistic that the deal with Colony Capital will mark an new beginning for the group. “We are pleased to join the Colony platform and team which allows us to continue building our businesses in the fast-growing markets that we have been committed to for over two decades,” Selcuk Yorgancioglu and Omar Lodhi, Co-Chief Executives of Abraaj Investment Management Limited said in a statement.