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Abu Dhabi, UAEThursday 18 October 2018

UAE regulator asks public firms to declare exposure to Abraaj

Private equity company sold funds business last week in court-supervised restructuring

Abraaj Group chief executive Arif Naqvi, who remains in the UK to avoid risking arrest in Dubai oversaw the management of around $14bn assets at the peak of private equity fund's growth. Sarah Dea / The National
Abraaj Group chief executive Arif Naqvi, who remains in the UK to avoid risking arrest in Dubai oversaw the management of around $14bn assets at the peak of private equity fund's growth. Sarah Dea / The National

UAE-listed companies, including some of the country’s biggest banks, have been asked to declare their exposure to embattled private equity firm Abraaj, which filed for provisional liquidation last week.

The Securities & Commodities Authority (SCA) sent a letter last week and companies had until Thursday to submit their responses, the regulator’s chief executive Obaid Al Zaabi told Reuters.

Mr Al Zaabi was unavailable for comment on Saturday, and the SCA declined to provide an official statement. An Abraaj spokeswoman declined to comment on the SCA’s letter but told The National the firm “continues to work very closely” with its UAE regulator, the Dubai Financial Services Authority (DFSA), on the matter.

The DFSA is the regulator of financial free zone Dubai International Financial Centre (DIFC), where an Abraaj entity is registered. In a statement on its website on Thursday, the DFSA said it “will be discussing various matters with [the liquidators] and continues to work toward safeguarding the interests of investors”.

The Middle East’s biggest private equity firm, which at its peak had nearly $14 billion of assets under management, is working with liquidators to restructure its liabilities in the wake of allegations earlier this year that it misused investors’ money in a healthcare fund.

The $1bn Abraaj Growth Markets Health Fund deployed capital from investors including the Bill & Melinda Gates Foundation, the World Bank’s International Finance Corporation, the UK’s CDC Group and Proparco Group of France.

These four out of a total 24 investors requested an audit of the health fund and engaged Ankura Consulting to find out what had happened to some of the money invested in the fund, according to an Abraaj spokesman. Abraaj has denied any wrongdoing.

The Grand Court of the Cayman Islands last week approved Abraaj’s request for a provisional liquidation of its business, enabling it to restructure in the interest of the majority of its stakeholders.

A request for a court-supervised restructuring of its fund management business was also approved last week, and Abraaj said on Thursday it agreed to sell its Latin America, Sub-Saharan Africa, North Africa and Turkey funds management business to US investment management firm Colony Capital.

The DFSA said the regulator “is aware of the proposed transaction” between Abraaj and Colony Capital.

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Read more:

What exactly is going on at Dubai private equity firm Abraaj

Abraaj agrees to sell big chunk of its fund business to Colony Capital

Abraaj restructuring request approved by Cayman Islands court

Air Arabia says total exposure to Abraaj is $336m

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Sharjah-based low-cost carrier Air Arabia has a $336 million exposure to Abraaj through fund portfolios and short-term investments, it said on Wednesday in a statement to the Dubai Financial Market, where its shares are listed. Shares in the airline fell by as much as 7 per cent because of its links to the company.

However, the exposure has “no significant impact on Air Arabia’s daily or future business or on its liquidity status and the business is operating as usual”, the statement added. Like other Abraaj creditors, the airline has appointed a party to represent its interests in court while the provisional liquidation is carried out, and further updates will be made as and when available.

Some of the UAE’s biggest banks also have exposure to Abraaj. Reuters reported in March that a group of lenders including Societe Generale, Mashreq, Noor Bank and Commercial Bank of Dubai had provided money to Abraaj on a bilateral basis under secured loans. They were told by Abraaj in May that the sale of part of its fund-management unit would help resolve potential liquidity issues.

Since then, creditors and stakeholders have backed the restructuring now under way and overseen by court-appointed liquidators from PwC in Cayman and in London, and Deloitte for the funds management business.

“We have the support of the secured banking group in terms of the court supervised restructuring process,” the Abraaj spokeswoman said. “We are now in the next stage of this restructuring process, with the sale of our regional funds business to Colony Capital.”

A secured creditor is a lender or creditor that extends capital or is associated with an investment that is backed by collateral.