Abraaj’s orderly restructuring to protect rights of stakeholders: Naqvi

KARACHI: Arif Naqvi, the founder and chief executive officer (CEO) of the Middle East’s biggest private equity firm Abraaj, on Friday said the company’s orderly restructuring will protect the rights of all the stakeholders.

The board of Abraaj Holdings recently filed an application for provisional liquidation in the grand court of the Cayman Islands.

“By entering into this voluntary process, under the supervision of the court, we believe that the rights of all stakeholders can be protected through an orderly restructuring, enabling the maximum value to be realised and the Group’s obligations to be met,” Naqvi said in a statement. “It was not an easy decision to make, but we believe this is the right decision for the firm going forward.”

Naqvi founded Abraaj with $60 million in 2002 and built it into an emerging market’s leading fund with assets of $13.6 billion.

A dispute over the use of $1 billion healthcare fund emerged early this year between the firm and four of its investors, including Bill and Melinda Gates Foundation and International Finance Corporation.

“When I founded Abraaj in Dubai…, I never thought this business would end up spanning the globe to become a leading investor in growth markets,” he said. “I did see the opportunity to create a company that could unlock value in fast-growing, but often overlooked, markets whilst delivering compelling returns for investors.”

Abraaj’s team built a global business and successfully deployed private capital in some of the fastest growing regions of the world and in sectors that are transformative for the economy and the middle-class community that powers it – be that in education, healthcare, financial services, or infrastructure.

“We have created jobs, built soft and hard infrastructure and expanded life sustaining services to reach a multitude of individuals and families,” Naqvi said. “As we deployed and returned capital to our investors we also gave back to the communities that we touched though our time, partnerships and corporate philanthropy.”

Abraaj’s executive said earlier this year gaps in internal governance and operating procedures were discovered and “as a result we continue to navigate the business through very challenging circumstances”.

“As you can imagine, the negative reports on Abraaj, many of which are out of context, have significantly damaged our firm’s value and undermined the business at different points over the course of the last four months,” he said.

“Despite all the rumours and briefings against us, and me personally, to my knowledge there was no intentional wrongdoing. In retrospect, however, I think things could have been done differently, and we might not be where we are today.”

Naqvi further said the company received ‘strong’ interest from potential acquirers for the operations of fund management business Abraaj Investment Management Limited. “Talks are at an advanced stage and we continue to work together to achieve the most effective outcome for the firm,” he added.

Abraaj filed a petition in the Cayman Islands, asking the court to appoint Simon Conway of PwC Corporate Finance and Recovery (Cayman) Limited and Michael Jervis and Mo Farzadi of PricewaterhouseCoopers as joint provisional liquidators (JPLs).

“The company has made this application so that the rights of all stakeholders can be protected while the company and the JPLs promote a consensual restructuring of the company’s obligations,” Abraaj said in a statement issued on Thursday. “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.”

The company filed the application in the Cayman Islands, being the jurisdiction of incorporation for it and many of its subsidiaries and affiliates.

Reuters adds: The move is to thwart separate legal action by the Kuwait Public Institution for Social Security and another creditor, who are seeking the liquidation and winding up of Abraaj for non-payment of debt. Dubai-based Abraaj has denied it misused the funds.

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 $1 billion, 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 of Abraaj 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 advisors and Houlihan Lokey are serving as financial advisors to Abraaj 333Holdings.