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Abu Dhabi Court to decide shortly on hospital operator NMC’s administration shift

ADGM Court to weigh on shifting these right currently held by UK court

Dubai: The process to shift control of NMC Group’s administration under Abu Dhabi’s jurisdiction has taken a major step. As part of this, the ADGM (Abu Dhabi Global Market) Court has taken up for hearing the request to appoint Richard Fleming and Ben Cairns - of the restructuring consultancy Alvarez & Marsal - as joint administrators of NMC Group entities.

There are two options in front of the administrators and all of NMC’s creditors - start selling off non-core assets immediately and rebuild NMC as a hospital and spciality clinic operator. But if the turnaround plan does not get an approval, it would mean even core assets - such as individual hospitals and other healthcare assets - will get sold off from January onwards.

Obviously, the first option is what would be termed as ideal under the circumstances. All through the pandemic months, NMC and its network proved its mettle as a frontline organisation in the battle against COVID-19. As per current forecasts, NMC’s EBITDA (earnings before interest, tax, depreciation and amortisation) could total $162.8 million in 2021 and $212 million in 2022.

The Abu Dhabi headquartered hospital operator and its other group entities was formally placed under administrator by the UK High Court in April. This was on an appeal filed before that court by Abu Dhabi Commercial Bank, which has the highest loan exposure to NMC.

The shift to an ADGM Court jurisdiction thus shifts all of the action to Abu Dhabi. “The ADGM Court follows common law practice, and what this essentially does is ensure all creditors of NMC comply with the judgements passed on by it.” Apart from what it means for NMC’s future specifically, it also sets up a high-profile role for ADGM and of its Court, and that in itself is a landmark in UAE’s corporate annals. 

The UK Court appointed administrators together with the current NMC management have cobbled together a corporate turnaround programme, which could see part of the heavy debt burden NMC carried to be converted into equity. (NMC’s overall debt is upwards of $6 billion, much of which was "officially" added to the books earlier this year.)

Consolidate the process

All future ADGM Court rulings will supersede any judgements passed by any other court on NMC issues. It also effectively means that all creditors will abide by ADGM’s edicts on the issue.

“The core issues surrounding NMC is at heart an Abu Dhabi or UAE issue,” said a banker with exposure to NMC. “Shifting the administration of NMC under a UAE court will simplify legal processes and decisions that will be taken to pay off banks/creditors and set a future course for NMC.”

CATCHING THE PERPETRATORS

Trying to get back the billions of dollars siphoned by the previous NMC management is not going to be easy. In a best-case scenario, claims against "wrongdoers" are expected to take more than two years to achieve and potentially in excess of five years in some areas.

Debt for equity

In its turnaround plan, the administrators – Alvarez & Marsal – has proposed to offer NMC creditors up to 67 per cent equity in lieu of debt. Under the ADGM process, NMC has until January 30, 2021 to deliver an agreed plan of reorganization. If that does not come about, NMC must use its backup plan to sell "core assets".

But divesting NMC’s "non-core assets" can still continue during the ADGM mandate process. (NMC’s trading division with its skincare product licenses has already seen some divestments.)

NEED FOR CASH

Once it gets approval from ADGM Court, the administrators will ask the Court to allow NMC to obtain credit - or incur debt - under a funding arrangement underwritten by Abu Dhabi Commercial Bank, Sculptor Capital Investments, Emirates Islamic Bank and HSBC Bank Middle East Ltd.

These funds will also be needed to pay off salary obligations.