Abraaj Hires Houlihan for Talks With Investors in Troubled Fund

(Bloomberg) -- The Middle East’s Abraaj Group, roiled by allegations of misused money, hired investment bank Houlihan Lokey Inc. for assistance in negotiations with investors in its $1 billion health fund.

The Dubai-based firm held talks last week with some of the investors who had raised concerns that the money wasn’t being used for its stated purpose, according to people with knowledge of the matter. The outcome of the meeting wasn’t immediately clear, the people said, asking not to be identified as the matter is private.

A representative for Abraaj, which is focused on emerging markets, declined to comment.

Houlihan Lokey is helping Abraaj “with issues pertaining to the Abraaj Growth Markets Health Fund,” the bank’s Managing Director Jeff Hammer said in response to queries. “We believe Houlihan Lokey’s expertise in helping investment managers and investors bridge differences and align interests will facilitate a mutually beneficial solution for all stakeholders.”

The Los Angeles-based advisory firm’s mandate could be widened at a later date, one of the people said.

Abraaj, which in February conducted an internal review and concluded that money in its health fund had been properly accounted for, has nevertheless been forced to return capital in a new global fund and halt fresh investments temporarily. The firm is reorganizing its structure -- with founder Arif Naqvi ceding control of the fund management business -- and plans to introduce new internal controls.

It cut about 15 percent of its total workforce last month and is seeking to sell a stake in the funds division to raise cash amid heightened regulatory scrutiny and the departure of key executives.

The Bill & Melinda Gates Foundation, the World Bank’s International Finance Corp. unit, CDC Group and Proparco Group had hired a forensic accountant to examine what happened to some of their money in the health fund, the Wall Street Journal reported Feb. 2, citing people familiar with the matter. Abraaj said a discrepancy between the amount of money requested from the investors and what was invested was because of delays in some projects, according to the newspaper.

To contact the reporters on this story: Dinesh Nair in London at dnair5@bloomberg.net, Matthew Martin in Dubai at mmartin128@bloomberg.net.

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Chitra Somayaji

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