Tuesday 05, June 2018 by Jessica Combes

Abraaj expects deal on secured debt, Kuwaiti creditor holds out

 

Private equity firm Abraaj said on Monday it hopes to reach a deal with its secured creditors, although sources said that a Kuwaiti unsecured creditor was holding out

This could stall the sale of its investment management business.

Dubai-based Abraaj Holdings is trying to push through a sale of Abraaj Investment Management to New York-based Cerberus Capital Management—which manages more assets totalling more than $30 billion, specialises in investments in distressed assets—as it tries to stem the fallout from allegations it misused investor money in a $1 billion healthcare fund; the private equity fund denies any wrongdoing.

“The secured creditors are expected to imminently conclude a standstill which will provide Abraaj the ability to meet its obligations in an orderly fashion,” Abraaj said in a statement after a meeting with lenders, shareholders and other parties to discuss the restructuring of the firm, according to Reuters.

Most of the creditors agreed to the standstill, which would see Abraaj’s debt frozen for around 90 to 120 days, two sources said, estimating Abraaj’s total debt at around $1 billion, adding that in order for the sale of its business investment management business to go ahead, Abraaj needs the support of all lenders, including unsecured creditors.

Kuwait’s Public Institution for Social Security (PIFSS), an unsecured creditor, refused to agree to the standstill, causing an unforeseen obstacle to the deal, the sources said.

Last week, The Wall Street Journal reported that PIFSS filed a case in a Cayman Islands court against Abraaj, claiming it is unable to repay a $100 million loan and $7 million interest.

Reuters added that under the deal offered to lenders, secured creditors would get paid in full in cash now and unsecured creditors would have to wait for payment, with the delay due to the recovery of assets at the holding company level, one of the sources said.

Another source said PIFSS was given a 48-hour deadline to agree to the deal and that creditors expected Cerberus would be able to persuade the Kuwaitis to accept too as failure to do so would put the sale in jeopardy and Abraaj’s future at risk.

Kuwait’s PIFSS and Cerberus did not immediately respond to requests for comment, while Abraaj declined to comment on the discussions with the Kuwaiti lender, Reuters said.

 

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