Abraaj pressured to restructure $1 billion debt


A large creditor of Abraaj Group wants a Cayman Islands court to oversee the debt restructuring of the private-equity firm, adding more legal pressure on a once-rising star of the Middle East investment world.

In documents filed Friday in the Cayman Islands court system, private-debt specialist Auctus Fund Ltd. said Abraaj’s holding company and its private-equity unit owes it about $300 million. Auctus wants to use the Cayman Islands court system to create a process that allows Abraaj to stave off collapse and repay its $1 billion in debt in an “orderly and optimal fashion,” said a statement by Auctus’s law firm, Kobre & Kim, which has an office in the Cayman Islands.

Representatives for Abraaj and Auctus didn’t respond to requests for comment.

The petition filed by Auctus follows a separate court request last month in the Cayman Islands from an Abraaj investor, Kuwait’s Public Institution for Social Security, a national pension fund. The Kuwaiti fund said in a May 22 court document that Abraaj should be liquidated and called it “substantially insolvent” and unable to pay a $100 million loan and $7 million interest.

Auctus’s law firm’s statement said Auctus is seeking to avoid the “value destruction that would likely occur in the kind of process” sought by the Kuwaiti fund.

Abraaj is incorporated in the Cayman Islands and does business in and out of Dubai.

Abraaj has said the firm is trying to reach a “consensual outcome” with Kuwait’s pension fund. A court hearing for the bankruptcy case in the Cayman Islands is scheduled for late June.

Abraaj’s woes began this year when the Bill & Melinda Gates Foundation and other investors hired a forensic accountant to look into possible misuse of money they had put into a $1 billion Abraaj health-care fund, according to people familiar with the audit.

The audit found that Abraaj didn’t spend all of the money on hospitals in countries including India and Nigeria as promised, two of these people said. Instead, the audit showed, Abraaj transferred some money out of the health-care fund, these people said. The audit didn’t show what the money was specifically used for, they said.

Abraaj has said money moved out of the fund, the Abraaj Growth Markets Health Fund, was used for its stated purpose or returned to investors. The firm also said that a separate audit it commissioned, carried out by KPMG, found that all the money in the health-care fund was handled “in line with the agreed upon procedures.”

According to Auctus’s petition, Abraaj’s private-equity unit was supposed to repay $100 million to an unnamed lender on Feb. 28 but didn’t. The unnamed lender assigned the debt to Auctus on May 30, the document shows.

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

Source : MTV