NMC Succumbs to Administration After Giving In to Creditors

(Bloomberg) -- Just two years after its market value soared to more than $10 billion, NMC Health Plc was placed in administration by a London court as the troubled health-care provider succumbed to creditor demands.

NMC, the Middle East’s largest hospital operator, will be run by administrators Alvarez & Marsal, Judge Sebastian Prentis said via videoconference Thursday. It’s a boost for state-owned Abu Dhabi Commercial Bank PJSC, which is owed $963 million. It had pushed for administration in a bid to get management to relinquish control.

Once the Arab world’s top performing stock, the shares of the company founded by Indian entrepreneur Bavaguthu Raghuram Shetty plunged before trading was suspended amid allegations of fraud. Most of NMC’s senior management has resigned since it revealed more than $4 billion of undisclosed debt. The company was also dropped from the FTSE 100 index.

“One of the most striking things about this was that until less than four months ago this company was overtly carrying on business entirely as normal,” Prentis said. “Since then, the wheel has turned and it has kept turning.”

“It’s clear that something has gone very wrong with the management and oversight of this company,” the judge said.

In a letter to the court, NMC’s executive chairman Faisal Belhoul said the company continued to reject allegations made by Abu Dhabi Commercial Bank.

The bank said it pushed for administration because it feared that NMC would be unable to pay employees in the months to come and that the whole group would collapse.

“If this happens, it will imperil the health of the citizens in the U.A.E.,” Abu Dhabi Commercial Bank’s lawyer said in a court filing. The bank “considers that steps must be taken now, before it is too late, to secure the company’s financial position.”

In 2012, NMC became the first company from Abu Dhabi to list on the London stock exchange. The health-care provider’s troubles have renewed concerns about the lack of corporate governance in the U.A.E., where both Abu Dhabi and Dubai in the past decade have transformed into two of the Middle East’s leading financial centers.

In an emailed statement, Shetty said he was pursuing his own investigation. “I am extremely eager and determined to bring to light the full facts, and the whole truth, around what has transpired to all stakeholders as quickly as possible,” he said.

Creditors turned to the London courts to force the issue.

According to court filings, Dubai Islamic Bank PJSC is owed $541 million, and Abu Dhabi Islamic Bank PJSC is owed $325 million. Barclays Plc was owed $146 million. Standard Chartered Plc, which is a lender in a further $250 million lending facility alongside Abu Dhabi Commercial Bank, said it would support administration if governance changes were not made.

NMC’s new chairman had resisted creditors’ demands until the eve of the court hearing, arguing that such a move would endanger lives as the coronavirus spreads across the U.A.E.

Abu Dhabi Commercial Bank’s move echoes that of another financial crisis in the Gulf, where a Kuwaiti fund helped precipitate the collapse of Dubai’s marquee investment firm, Abraaj Group, by pushing for administration in court. Meanwhile, Abu Dhabi is still grappling with the fallout of the global scandal involving Malaysian sovereign fund 1MDB.

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