Cerberus offers $125 million to buy Abraaj unit

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Cerberus Capital Management on Monday offered $125 million to acquire the private-equity business of embattled Abraaj Group of Dubai, people familiar with the matter said, amid a fight with creditors over Abraaj’s debt-restructuring plan.

Abraaj’s executives are pinning their hopes on the Cerberus bid to bring stability while it works out financial obligations with creditors spooked by questions raised about its financial practices. Once one of the top private-equity players in the Middle East’s nascent financial community, Abraaj has lost much of its senior leadership and has closed down funds this year during a dispute with investors including the Bill and Melinda Gates Foundation, a unit of the World Bank and Kuwait’s national pension fund.

Abraaj held a meeting in Dubai with investors, creditors and others on Monday, saying in a news release later that a proposed sale was discussed. The release didn’t name Cerberus, which is based in New York.

If a sale to Cerberus went through, it would involve existing investor commitments being transferred to a new company, a person familiar with the matter said. At the same time, Cerberus wouldn’t take on any of the existing liabilities of either the fund management business or Abraaj’s holding company, the person added.

An Abraaj spokesman declined to comment on the details of any deal.

Any sale would need the approval of all of its creditors, and it isn’t clear that the firm would get their support. It would leave Abraaj with a holding company that few know much about.

The Kuwait Public Institution for Social Security is trying to force Abraaj into bankruptcy in a Cayman Islands court. The Kuwaiti fund alleges that Abraaj can’t repay a $100 million loan and $7 million interest, according to a court document viewed by The Wall Street Journal.

The person said the Kuwait fund also wouldn’t go along with other creditors in giving Abraaj more time to restructure its debts — an agreement known as a debt standstill.

Abraaj said its secured creditors — which tend to be banks or asset-based lenders — had agreed to the debt standstill.

“We are pleased with the outcome of today’s meeting and the constructive support we have received from our secured creditors in enabling us to move forward and resolve outstanding issues,” Abraaj said in the release.

Abraaj’s troubles began earlier this year when investors in its $1 billion health-care fund, including the Gates Foundation and the World Bank, alleged the firm used their money to finance its business rather than for hospitals and clinics in Africa and Asia, The Wall Street Journal has reported. The company has since acknowledged moving at least $200 million out of a separate $1.6 billion fund.

Proceeds from a sale of the private-equity business would be used to pay back investors in the buyout fund, a person familiar with the matter said.

The troubles have forced Abraaj’s founder Arif Naqvi to step back from running the firm day-to-day.

Cerberus appears to have gained the edge over Colony NorthStar, which had earlier held talks with Abraaj about buying its fund management business, according to people familiar with the matter.

Monday’s meeting was held at the Dubai offices of law firm Allen & Overy, one of the legal advisers involved with Abraaj. Creditors, lawyers, advisers and the co-chief executives of Abraaj’s private equity business, Omar Lodhi and Selcuk Yorgancioglu, all attended the gathering, which lasted most of the day.

Investment bank Houlihan Lokey is acting as adviser to Abraaj.

Cerberus, which counts former U.S. Vice President Dan Quayle as the chairman of Cerberus Global Investments, has over $30 million in assets under management, according to its website. It made its name buying distressed companies and selling them for a profit.

Write to Nicolas Parasie at nicolas.parasie@wsj.com and William Louch at william.louch@wsj.com



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