DUBAI: NMC Health, the troubled UAE medical business, has asked creditors for an “informal standstill” on loan repayments, totaling around $2 billion, as fears grow for its financial survival as an independent corporate entity.
One leading rating agency, Moody’s, said it was halting coverage of NMC’s credit profile because it had taken a view that “NMC no longer has reliable access to funding.”
A spokesman for NMC declined to comment on reports that staff at its hospitals in the UAE were no longer being paid.
In a statement, NMC said it was “currently fully focused on safeguarding operational liquidity to continue funding existing operations throughout its various subsidiaries.”
The Abu Dhabi authorities, conscious of the risk from a collapse of the UAE’s leading health service provider as the global coronavirus outbreak widens, are believed to be keeping a close watch on the NMC situation and could provide emergency funding, according to one government source who declined to be identified.
The company — listed on the London Stock Exchange (LSE) but with most of its operations in the Middle East including a joint venture in Saudi Arabia — has appointed three top advisers to assist in its efforts to recover from a dramatic decline in its value in the wake of allegations about financial mismanagement and lack of transparency at the business.
US investment bank Moelis, international accounting firm PwC, and lawyers Allen & Overy have been named as “independent financial adviser, operational adviser and legal adviser respectively with immediate effect,” NMC said in a statement to the LSE.
“Moelis will support and advise on NMC’s discussions with its lenders, while PwC will assist on liquidity management and operational measures,” the statement added. Shares in the company, once one of the best performing stocks on the LSE, were suspended last week in light of ongoing problems.
NMC also revealed that its three biggest shareholders — founder B. R. Shetty and two UAE entrepreneurs Khaleefa Butti Omair Al-Muhairi and Saeed Mohamed Butti Mohamed Khalfan Al-Qebaisi — now own less than the 30 percent of its shares they once claimed.
NMC has been under pressure since last December, when Muddy Waters, an American investor known as an “activist” shareholder, published allegations about irregularities at the company, including issues with regard to asset values, cash balances, reported profits, and reported debt levels.
San Francisco-based Muddy Waters, led by Chief Executive Officer Carson Block, said it had taken a “short” position in NMC shares, meaning it was selling shares in expectation of being able to buy them at a lower price later on. “Shorting” shares is a recognized and legal mechanism in Western and Gulf markets.
Since the Muddy Waters announcement, NMC shares have collapsed by around 70 percent before they were suspended, wiping off billions of dollars-worth of value and exposing investors to big losses.
The revelation that the three main shareholders had less than 30 percent, triggered the request for a debt standstill. “In the event of a trigger, unutilized commitments are canceled, and outstanding participations become due and payable if so requested by an individual lender (subject to not less than five business days’ notice),” NMC said.
NMC added that it would anticipate a reappraisal of its external credit ratings. Moody’s said it would withdraw coverage “because it no longer considers the company’s audited financial statements to be reliable.”
NMC last year announced a joint venture with the Saudi General Organization for Social Insurance via its Hassana investment unit to ramp up its operations in the Kingdom, the largest health market in the Middle East.
The irregularities at NMC are being investigated by a committee headed by Louis Freeh, a former head of the US Federal Bureau of Investigation. Last week an interim report from the committee led to the resignation of Prasanth Manghat as CEO of the company, while the Chief Financial Officer Prashanth Shenoy was placed on “extended sick leave,” as shareholding discrepancies came to light.