Opinion

NMC and Finablr up to their necks in muddy waters

NMC and Finablr up to their necks in muddy waters

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The meltdown of NMC Health continues apace. Shares in the Abu Dhabi-based medical group, the leader in the regional health business, which is listed on the London Stock Exchange (LSE), have lost 70 percent of their value since the middle of December. That represents £4 billion ($5.19 billion) of value lost for shareholders in less than two months.

The significance goes far beyond the world of finance. Founded in the 1970s by Indian entrepreneur B. R. Shetty, NMC holds a hallowed place in the UAE corporate structure.

It was one of the first medical businesses to bring quality health care to citizens and residents in the UAE’s private sector. It is the closest the country has come to having a national health service along Western lines.

NMC also became a standard-bearer for UAE business on the global stage. In 2012 it listed its shares on the LSE and saw them soar by 20 times in value. In summer 2018, NMC shares were trading at more than £4,000 each; today they change hands at around £800.

But the seeds of NMC’s current crisis — not too strong a word — go back further than the London IPO (initial public offering). During the financial crisis, NMC found itself in urgent need of funds. Given its central role in UAE life, it quickly found backers, with good links to the Abu Dhabi establishment, who injected liquidity in exchange for equity.

Saeed Al-Qebaisi and Khaleefa Al-Muhairi, Emirati entrepreneurs par excellence, along with Shetty himself, were the main beneficiaries of the booming share price, but they now find themselves the victims of huge value destruction.

Last December, Muddy Waters, a San Francisco-based investment firm with a reputation for hard-hitting analysis and market intervention, struck with a vengeance. Led by the combative Carson Block, the firm makes money by identifying what it regards as over-valued companies and “shorting” their shares.

Short selling is stock market practice whereby an investor agrees to sell shares at a certain price in the expectation that it will be able to buy them back at a lower price in the future. Common in Western markets, it was only allowed in the UAE and Saudi Arabia relatively recently.

Muddy Waters announced it was placing NMC on its shortlist after it identified serious defects at the company that had gone unnoticed in the preparation for the London IPO and in the subsequent boom years. Asset valuations, levels of debt, executive remuneration and agreements with counterparts were all called into question.

NMC denied the allegations and appointed a former director of the FBI, Louis Freeh, to examine them, but the important point is that investors took them seriously and dumped the shares.

Now, as we await the verdict from Freeh, NMC is in a spiral of financial decline that threatens to undermine its very successful medical operations. London regulators are taking an increasing interest in the situation.

To add to the main NMC shareholders’ problems, another company in which they are invested, the financial services group Finablr, has also been savaged by the stock markets, despite the fact Muddy Waters has directly not targeted it at all.

Much like NMC, the core of the Finablr business is an important customer-interfacing operation, via the foreign exchange and remittance counters branded UAExchange. Similar to hospitals and clinics, such services are crucial in an economy like the UAE, dependent as it is on foreign labor.

The resonance of the NMC/Finablr debacles could be felt outside the UAE. NMC expanded aggressively in many global health markets in the good times, including the joint venture in Saudi Arabia with Hassana, part of the Kingdom’s General Organization for Social Insurance, announced last year.

There is no suggestion of any difficulties at that joint venture, nor has it attracted the public attention of Muddy Waters. But the Saudi partners in the deal have the right, even the duty, to question whether its UAE-based allies will remain as focused on the new venture in light of their problems at home.

What happens next at NMC and Finablr is crucial. There is talk of an intervention by the UAE authorities, which would not be unjustified given the central role both play in the country’s life. There is also speculation that Shetty and the other investors will sell the businesses to others with deeper pockets.

Much depends on the next move by Muddy Waters.

 

• Frank Kane is an award-winning business journalist based in Dubai.

Twitter: @frankkanedubai

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point-of-view

Vice chairman of UAE’s NMC Health quits as shareholder twists emerge

NMC is the largest health care provider in the UAE. (Supplied)
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Updated 16 February 2020

Vice chairman of UAE’s NMC Health quits as shareholder twists emerge

  • Resignation came after UK regulators announced that they were taking a closer look at the company

DUBAI: NMC Health is still trying to unravel details about the holdings of the company’s top investors, it said on Friday after announcing that one of its controlling shareholders had resigned from the board.

The largest private health care provider in the UAE is listed in London on the blue-chip FTSE 100 index but has come under increasing pressure after shareholder Muddy Waters raised questions over its finances, prompting major investors to sell out, sending its share price tumbling.

On Friday NMC said that vice chairman Khalifa Butti Omeir Bin Yousef is stepping down from the board. His resignation came after UK regulators this week said they were looking into the company after news that founder and chairman B.R. Shetty had inaccurately disclosed the size of his stake in the business.

NMC subsequently said on Friday that there had been a series of complex shareholder dealings involving Shetty, Bin Yousef and another top investor, Saeed Butti Al-Qebaisi.

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The company said Bin Yousef and Al-Qebaisi had notified them that some of their shares had been pledged as security for loans by Shetty in an arrangement they were not party to.

“The company continues urgently to seek clarity from Dr. B.R. Shetty, Khalifa Bin Butti and H.E. Saeed Bin Butti in relation to the above arrangements and their respective shareholdings,” NMC said.

The disclosure is likely to raise further questions about NMC’s governance and loans taken out by its top shareholders against their stock. Shetty on Monday said that he was stepping back from the board while a legal review of his shareholding disclosures continues.

Al-Qebaisi and Bin Yousef on Friday said that an estimated 26 million of the 58.5 million shares they hold have been pledged against loans.

Shares in NMC were down 3.8 percent in afternoon trade. The stock has slumped by 70 percent since Muddy Waters issued a report on Dec. 17 questioning the value of the company’s assets and reported cash balances.

NMC has denied Muddy Waters’ allegations and launched an independent review of its finances.

The company this week said it had received buyout interest from Italian-backed GKSD Investment Holding and United States-based KKR & Co. GKSD subsequently confirmed it could bid for the hospital operator but KKR has said it would not.


Cyprus sets stage for tourism recovery as airports reopen

Updated 07 June 2020

Cyprus sets stage for tourism recovery as airports reopen

  • Mediterranean holiday island tempts visitors with bold hospitality package that includes medical care

NICOSIA: Cyprus will reopen for international tourism on Tuesday, with airports welcoming visitors after an almost three-month shutdown, and a bold plan to cover health-care costs for visitors.

But with arrivals expected to be down by 70 percent this year due to the chaos brought by the COVID-19 pandemic, it’s a leap of faith for the small Mediterranean holiday island.

“Nobody here is expecting to make any money this year,” Deputy Tourism Minister Savvas Perdios said. “We are setting the stage for the beginning of our recovery in 2021.”

The divided island’s tourism sector normally accounts for around 15 percent of gross domestic product, but has dried up in past months amid global measures to combat the spread of the novel coronavirus.

Cyprus saw a record 3.97 million arrivals in 2019, with more than half its market made up of British and Russian visitors.

But even if the island’s airports in Larnaca and Paphos open up to arrivals on Tuesday, with the first flight due to arrive from Athens around noon, neither Britain or Russia are among the 19 countries allowed to land there.

The list of permitted countries, which also include Bulgaria, Germany and Malta, have been chosen based on epidemiological data and split into two categories.

Initially all travellers will need to show proof of a negative COVID-19 test undertaken within 72 hours of travel, but from June 20, only those arriving from six countries in the second category, such as Poland and Romania, will need to do so.

The government says the lists will be revised weekly and more countries can be added.

Cyprus will also cover accommodation, dining and medical care for any tourists who fall ill with the COVID-19 illness during their stay, as well as accommodation and meals for their families and close contacts.

“What we offer and what we sell is not the sun and the sea, it’s hospitality, and this is an extension of our hospitality,” Perdios said.

The government has designated a 100-bed COVID-19 hospital for tourists that Perdios said would be located in the Larnaca region, while 112 ICU units have been allocated for visitors.

Perdios said several four-star hotels would provide 500 quarantine rooms for close contacts of those who fall ill.

A raft of other health measures, including disinfection protocols and temperature checks at border controls, aim to protect travellers and locals alike.

“We’ve gone to big lengths to think ahead of things that could go wrong and try to devise plan Bs and Cs”, Perdios said.

The Republic of Cyprus, in the south of the island, has registered 960 novel coronavirus cases and 17 deaths.

Perdios expressed hope that British tourists could be welcomed “sometime after mid-July”, with Russia “slightly later, maybe by a couple of weeks.”

A recently announced deal with Hungarian low-cost carrier Wizz Air to open a base in Cyprus from July was also an important step towards expanding and diversifying the island’s tourist markets, he said.

While no date has been set to allow international tourists to visit the breakaway Turkish Republic of Northern Cyprus, only recognised by Ankara, the health-care commitment would still apply to those visiting the north during their stay once the crossings are reopened.

“I am very confident that not only will we be able to continue providing our citizens with protection, but also caring for everybody who comes to the island on holiday”, he said.

“If we are coming out with a scheme like this, it’s because we can afford it, but most importantly, because we feel that it’s the right thing to do.”