NMC debts could be higher than $5 billion, advisers fear

NMC Health has identified it has an additional $2.7 billion of debt. (Reuters)
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Updated 12 March 2020

NMC debts could be higher than $5 billion, advisers fear

DUBAI: NMC Health, the troubled UAE-based hospitals group, is investigating at least $2.7 billion of new borrowings that have been uncovered by its new team of financial advisers and lawyers amid fears total debts could be considerably higher than $5 billion.

One adviser, who asked not to be named, said: “It’s really difficult to know the bottom of this at the moment. We are uncovering new items all the time.”

In a statement to the London Stock Exchange, where NMC shares were traded until they were suspended last month, the company said that the new borrowings — more than double its previously assumed level of debt — had not been “disclosed to or approved” by its board of directors.

It added that some of the cash “could have been utilized for non-group purposes,” but was still trying to “understand the exact nature and quantum” of the undisclosed facilities.

The revelation that NMC debts may be far higher than the previously disclosed $2 billion, and that there could still be other liabilities so far uncounted, is a major problem for the group as it seeks to continue operating while the UAE and other countries try to get to grips with the coronavirus.

FASTFACT

20,000

NMC employs 22,000 staff at 200 facilities in 19 countries.

NMC said that it had finally completed salary payments for last month to its 22,000 doctors and other medical staff at 200 facilities in 19 countries. Most of its business is in the UAE, where it accounts for about 30 percent of medical facilities. It also has a presence in Saudi Arabia via a joint venture signed last year as well as hospitals in Jeddah and Al Khobar.

“NMC is fully focused on safeguarding its operational liquidity to continue funding existing operations,” it added.

The business, founded by Indian entrepreneur BR Shetty in the 1970s, got into trouble last December when a report from US activist investor Muddy Waters alleged financial irregularities on a large scale.

NMC denied the allegations in the report, but the shares collapsed as further revelations emerged about over-valuation of assets, levels of debt and related party transactions.

In addition to Shetty, two UAE entrepreneurs — Khaleefa Butti Omair Al-Muhairi and Saeed Mohamed Butti Mohamed Khalfan Al-Qebaisi — controlled the company after it listed shares in London in 2012.

Advisers to Shetty said that he was in India on urgent family business, but was expected to return to the UAE when that was concluded.

The higher-than-expected level of debt will cloud attempts by the Abu Dhabi authorities to find a buyer for the business.


$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.