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Abraaj heads towards liquidation

Updated June 14, 2018

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KARACHI: Embattled Dubai-based private equity fund, Abraaj Capital, is planning to apply for provisional liquidation to fight back against two creditors who are pushing for winding up the fund since it defaulted on its debt obligations earlier this month, the Financial Times (FT) reported.

The fund has been in debt restructuring talks with its creditors, and nearly reached agreement with all secured lenders on a standstill arrangement until two unsecured creditors pressed their claim. The two creditors are Kuwait’s Public Institution for Social Security (PIFSS) and Auctus Fund Ltd. Both are claiming $100 million that is owed but not repaid.

The Kuwaiti lender had moved the courts in the Cayman Islands, where Abraaj is incorporated, for liquidation of the fund and use a sale of its assets to recover its loan. Later it was joined by Auctus Fund, which claims it loaned $100mn to Abraaj in late December for repayment by Feb 28. That repayment, according to reports based on court filings, was never made.

The court has set June 29 as the date for hearing the PIFSS petition. Auctus filed a different petition to seek an “orderly restructuring” that it claims will “avoid the kind of value destruction that would likely occur in the kind of process sought by PIFFS”, according to a report in Reuters. Auctus is aiming for a winding up of the fund’s investment management arm, according to the FT.

Abraaj’s own plans to file for “provisional liquidation” appear to be an attempt to pre-empt both of these petitions, and must be made before the June 29 hearing.

Abraaj has been in talks with its creditors to agree to a debt standstill arrangement till it can complete the process for a large sale of its assets to another investor. That sale now hangs in the balance as the fund struggles to get its unsecured creditors on board. It is in light of these discussions that Auctus Fund has approached the courts in the Cayman Islands, saying that such an “arrangement, under the oversight of the Cayman courts, will encourage and allow for a speedy, constructive and consensual conclusion of these matters.”

According to a Reuters report, “one source said a draft of Abraaj’s application for provisional liquidation has been prepared and must be filed before June 29, when the next hearing of the PIFSS case is scheduled at the Grand Court of the Cayman Islands.”

Abraaj Capital has been in the centre of an mounting series of problems ever since some large investors, including the World Bank and the Bill and Melinda Gates Foundation, alleged misuse of their money that was invested in the fund.

The funds were supposed to be used for building clinics and schools in countries like India, Pakistan and Nigeria, but the investors alleged the funds were drawn but never deployed for the purpose. Since then Abraaj has been hit by an investor revolt, followed by troubles with its creditors pushing it towards default, and now liquidation proceedings.

Published in Dawn, June 14th, 2018

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