May 31, 2018 / 12:31 PM / 5 months ago

Abraaj lenders seek legal advice on options against Dubai firm - sources

DUBAI, May 31 (Reuters) - Lenders to Dubai-based private equity firm Abraaj are seeking advice from law firm Clifford Chance on potential action they could take against the firm as concerns grow about its ability to repay its debt, two sources close to the matter said.

Abraaj, the Middle East and Africa’s biggest private equity fund, is experiencing cashflow pressures, said the sources, as it faces an investigation by some investors into how it used some of their money in a $1 billion healthcare fund.

Abraaj, which has denied any wrongdoing, said in a statement emailed to Reuters it is working constructively with creditors to resolve outstanding obligations.

“We can advise that a collaborative position has been adopted by Abraaj and its bankers to resolve matters in an orderly process and to the satisfaction of concerned parties,” the firm said without elaborating.

The sources said a group of banks including Societe Generale , Mashreq, Noor Bank and Commercial Bank of Dubai, which provided money to Abraaj on a bilateral basis under secured loans, are seeking advice from Clifford Chance on measures they could take, such as giving Abraaj time to dispose of assets.

Noor Bank, Societe Generale and Clifford Chance declined to comment. The other banks did not respond to requests for comment.

Abraaj had managed $13.6 billion before it decided earlier this year to return $3 billion to investors and put a new $6 billion fund on hold.

Abraaj is locked in a row with investors over allegations it misused money in the healthcare fund and has been considering selling some or all of its investment management business.

This would help raise cash which along with proceeds from the planned sale of its stake in Pakistani utility K-Electric would ease cashflow pressures that have seen Abraaj violate some of its debt covenants, sources previously told Reuters.

DEBT CLAUSES

Bankers are worried about cross-default implications due to clauses in Abraaj’s debt, said two sources. It was not immediately clear if the clauses apply to all of the firm’s debt obligations, leaving open the risk that it could default on all of its loans if it misses payment on one of them.

Banks have increased monitoring of their Abraaj exposure, with at least one lender moving Abraaj to “special account” status, meaning the bank has started making provisions, said one of the sources.

Banks are keen to avoid any firesale of Abraaj’s assets, which would undermine any potential returns they could make, another source said, adding that concerns persisted about the outcome of the investigation and any related regulatory action.

Four investors, including the Bill & Melinda Gates Foundation and the World Bank’s International Finance Corporation arm, have hired Ankura Consulting to investigate alleged misuse of some of their money in the healthcare fund.

Separately, Abraaj has hired Deloitte to examine its business, including the healthcare fund.

The Wall Street Journal reported on Wednesday that Kuwait’s Public Institution for Social Security on May 22 filed a case in a Cayman Islands court against Abraaj, claiming the company is unable to repay a $100 million loan and $7 million interest by the agreed date.

Abraaj declined comment on the lawsuit and the Kuwait Public Institution for Social Security was not available to comment.

Deutsche Bank is looking to sell its small stake in Abraaj, two sources familiar with the matter told Reuters on Wednesday. (Editing by Ghaida Ghantous and David Holmes)

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