DUBAI: Abraaj, the Middle East’s biggest private equity firm, has filed a petition in the Cayman Islands, asking the court to appoint PwC as provisional liquidators for the embattled company.
“The appointment of provisional liquidators imposes a moratorium on the enforcement of all unsecured claims against the company, allowing time for a proposal to be put to creditors for the orderly restructuring of the company,” it said in a statement.
The move is to thwart separate legal action by the Kuwait Public Institution for Social Security (PIFSS) and another creditor, who are seeking the liquidation and winding up of Abraaj for non-payment of debt.
Dubai-based Abraaj has been trying to stem the fallout from a row with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp (IFC), over how it used their money in a $1 billion healthcare fund.
Move imposes a moratorium on enforcement of all unsecured claims against the company
Abraaj has denied it misused the funds.
Arif Naqvi founded Abraaj with $60 million in 2002 and built it into an emerging market champion with assets of $13.6bn at its peak before the row forced the firm to suspend a new fund and shakeup its management.
A court-appointed provisional liquidator helps safeguard the assets of the company until a wind-up application is heard by the court.
Naqvi said in a statement this process marks the culmination of an extremely complex and challenging phase of negotiations and detailed planning.
“Since our differences with certain investors first came to light, we have worked exhaustively and transparently to investigate the matter and address their concerns, all the while ensuring our tremendous investment teams around the world continue to support the growth of our partner companies,” he said.
Abraaj, with debts estimated at over $1bn, met its creditors earlier this month to reach a standstill deal, which the firm said was backed by the vast majority of its lenders, to facilitate the sale of its investment management business to Cerberus. However the Kuwaiti fund, an unsecured creditor, refused to join secured creditors in the proposed debt freeze agreement.
In another legal challenge to Abraaj, a little-known creditor also started legal proceedings in the Cayman Islands seeking the restructuring of the private equity firm’s liabilities. Allen & Overy LLP, Carey Olsen and Milbank, Tweed, Hadley & McCloy LLP are serving as legal advisers and Houlihan Lokey are serving as financial advisers to Abraaj 333Holdings.
Meanwhile, the identity of the second creditor to file suit against Abraaj in the Cayman Islands court emerged on Thursday.
A family involved with Abraaj handed over debt exposure to the private equity firm to a little-known fund that has now filed a petition against Abraaj, deepening its financial woes, sources said.
An adviser to the Jafar family said it was not party to the legal proceedings started by Auctus Fund in the Cayman Islands against Abraaj, although Hamid Jafar had provided Abraaj with a private loan which has since been transferred to Auctus.
Dubai-based Abraaj has declined to comment on the petition. Badr Jafar, who sits on Abraaj’s board and is the son of Hamid, had not responded to Reuters request for comment on the lawsuit.
The Jafar family, which controls Sharjah-based conglomerate Crescent, is linked to Abraaj through Badr’s board membership and the fact that Hamid was a founding shareholder in the firm.
The petition was filed this month by Saint Vincent-based Auctus Fund against Abraaj Investment Management Ltd (AIML) for non-payment of a $100m loan, according to a copy seen by Reuters.
Auctus Fund wants Abraaj’s investment management unit, AIML, to be wound up and Grant Thornton to be appointed official liquidators, according to the document.
It said Auctus’ “predecessor” extended $100m to AIML on Dec 21, 2017, that was to be paid back on Feb 28 under an oral agreement with Abraaj founder Arif Naqvi. Abraaj Holdings was supposed to provide security for the loan over its “unencumbered assets”, which it did not do.
Two cheques issued by AIML, dated Feb 28, to the lender to partially secure repayment of the loan bounced on presentation on May 3, the court filing says.
Auctus is the second creditor to file a lawsuit against Abraaj, which on Thursday filed for provisional liquidation in the Cayman Islands, where it is incorporated.
The petition suggests further cracks at Abraaj which is trying to stem the fallout from a dispute with investors over alleged misuse of funds. It denies any wrongdoing. The lawsuit sheds light on corporate governance practices at Abraaj which is facing a probe by four investors, including Bill Gates’ charitable trust and International Finance Corp, over the use of their money in a $1bn healthcare fund.
Published in Dawn, June 15th, 2018