Dubai: Two Dubai banks, Commercial Bank of Dubai (CBD) and Mashreq, on Thursday revealed a combined Dh675 million worth of exposure to Abraaj, bringing the total to Dh2.1 billion of exposure of the UAE listed companies to the embattled private equity firm.
CBD said it has $166.25 million (Dh610 million) exposure to Abraaj through a secured credit facility, the second biggest exposure to the embattled private equity firm after Air Arabia, which stood at Dh1.2 billion.
Mashreq said it owns Dh66.4 million worth of shares in Abraaj Holdings and its unit Menasa Capital holdings. In a statement posted on Dubai Financial Market’s website Thursday, Mashreq said it owned 16 million shares worth Dh66 million in Abraaj Holdings and it had 12.5 million shares in Menasa Capital, a unit of Abraaj, worth Dh459,125. The bank did not disclose of any other exposure to the PE firm.
Oman Insurance Company, meanwhile, held an investment of Dh19.7 million in the Abraaj Property fund, it said in a regulatory filing on Thursday. The disclosures came in from the listed companies on the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange as required by the UAE’s Securities and Commodities Authority. Thursday was the last day to reveal any such exposure to the PE firm. According to the DFM, out of 51 listed on the exchange, 42 companies have disclosed no exposure to Abraaj and four companies have disclosed exposure.
Earlier, Air Arabia revealed that it had about $336 million invested in Abraaj’s funds while Dana Gas had about $6 million invested in the Abraaj Infrastructure Fund.
First Abu Dhabi Bank disclosed of a $21.4 million secured loan due in April next year Emirates Insurance also disclosed a $2.4 million investment in the Abraaj Buyout fund II. The total exposure of the 10 listed firms in the UAE stood at Dh2.1 billion.
Abraaj has been accused of misusing funds by investors that include the Bill & Melinda Gates Foundation and the International Finance Corp. The funds were meant for investments in its health care funds.
The biggest private equity firm in the Middle East and North Africa (Mena) has since filed for provisional liquidation in the Cayman Islands. It also defaulted on loans made to the company, which resulted in a criminal case in a Sharjah court related to a bounced security cheque.
Lessons to be learnt
According to an industry expert, there are lessons to be learnt looking at the exposure of companies.
“The first lesson from this is that companies should not invest all its investment book with one company as it is unacceptable from a risk management perspective. In addition, there should be more coordination between banks with relation to exposure to one entity,” Tareq Qaqish, Managing Director — Asset Management at Mena Corp, told Gulf News.
Exposures to Abraaj also raises questions on the corporate governance standards of the companies involved, Qaqish pointed out. “Corporate governance should be tightened especially when we have board members sitting on several companies where we expect to witness conflict of interest. Abraaj board and executives were also board members on other companies which makes it easier to influence decisions,” he said.