Abraaj files for bankruptcy

August 2018 | DEALFRONT | BANKRUPTCY & RESTRUCTURING

Financier Worldwide Magazine

August 2018 Issue

Once a rising star of the Middle East investment world, humbler times now beckon for Dubai-based private equity firm Abraaj Holdings (AH), as it undergoes a debt restructuring plan under the auspices of court appointed joint provisional liquidators (JPLs).

The order by the Grand Court of the Cayman Islands to appoint JPLs – Simon Conway of PwC

Corporate Finance and Recovery (Cayman) Limited and Michael Jervis and Mohammed Farzadi of PwC – means that authorisation has been granted for all necessary steps to be taken to develop and propose, in consultation with AH and its advisers, a consensual restructuring of the company’s obligations. These obligations include £300m owed to private-debt specialist Auctus Fund Ltd and $100m to Kuwait’s Public Institution for Social Security, a national pension fund.

Furthermore, subject to the final sealed order of the Cayman Court, the JPL order ensures that the rights of all stakeholders can be protected. That said, the court-supervised restructuring has resulted in the resignation of AH chairman Sean Cleary, who left his role in June 2018.

“Our role is to manage the restructuring of AH in an orderly fashion, safeguard the assets of the company, and ensure that the interests of creditors, employees and broader stakeholders are fully served,” said Mr Jervis. “The order by the court enables AH to swiftly move into a stable phase of operations whereby restructuring plans and asset disposals can be executed upon in a protected and controlled environment.”

The court order grants extensive powers to the JPLs for the protection and management of AH assets, including maintaining oversight of board and management activities to maximise the returns to company stakeholders. AH’s secured creditors have provided their full support for the JPLs to work alongside the company to formulate and implement a restructuring of company liabilities which is in the best interest of all creditors.

Mr Jervis added: “Given our longstanding experience in global restructuring for financial and corporate institutions, PwC is extremely well placed to deliver a satisfactory outcome for the company’s constituents and is commencing on this process with immediate effect.”

In parallel proceedings, the court heard an application by Abraaj Investment Management Limited (AIML) – the Abraaj Group’s fund management business – to appoint David Soden and Stuart Sybersma of Deloitte as JPLs. This application was also approved by the court.

The decisions made by the court enable both AH and AIML to independently pursue court-supervised restructuring plans in an orderly fashion and for the benefit of their respective creditors. The court supervised restructuring of AH will have minimum impact on the day-to-day operations of the management of funds and their portfolio companies.

“We are pleased with this outcome and grateful to the court for its careful consideration of the issues and positive judgment,” said Arif Naqvi, founder of the Abraaj Group. “This order validates the position consistently maintained by Abraaj that an orderly restructuring, under the guidance of a highly experienced team of joint provisional liquidators, can ensure the outcomes we seek for the company and its creditors. We are wholly committed to supporting the JPLs through the restructuring process and ensuring stability and value maximisation for all parties.”

However, in an unfortunate development for Mr Naqvi, authorities in the United Arab Emirates (UAE) issued arrest warrants for both he and another executive, Muhammad Rafique Lakhani, for issuing a cheque for 177.1m dirhams ($48m) without sufficient funds being available. Both men deny the alleged mismanagement of company funds.

Fraser Tenant