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Some investors want new Abraaj review, potentially delaying key sale - document

Reuters  |  DUBAI 

By Tom Arnold, Saeed Azhar and Hadeel Al Sayegh

DUBAI (Reuters) - Some investors in funds managed by Dubai-based Abraaj want to block the sale of assets to pending a review of Abraaj's handling of funds, according to a report seen by Reuters, potentially delaying a deal key to the survival of the investment management business.

United States-based Colony offered last month to buy the fund management unit that runs Abraaj's Latin America, Sub Saharan Africa, and funds after months of turmoil at Abraaj triggered by a dispute with investors over the use of their in a $1 billion

Abraaj denies any wrongdoing, but the row has weighed heavily on the and Africa's largest firm, which filed for provisional liquidation in the last month.

A review of Abraaj's handling of investor is likely to delay the Colony transaction, according to a report by Abraaj Holdings' provisional liquidators,

The sale of some or all of Abraaj's fund management business, (AIML), is seen as critical to the business avoiding financial collapse.

However, the report also said other potential bidders had expressed interest in AIML assets, and at least two of them were viable alternative deals. One of those suitors is Cerberus Capital Management, sources familiar with the matter said.

and Abraaj said they could not provide any public comment on the report. Colony declined to comment. Cerberus did not immediately respond to requests for comment.

The PwC report said certain limited partners had expressed concerns over the Colony deal and that they wanted a review of the funds before agreeing to a sale of Abraaj Holdings' limited partners' stakes. It did not identify the limited partners.

The review is being requested to "understand if there has been any unknown misappropriation of cash in the funds", said the PwC report dated July 11.

It said the uncertainty was causing Abraaj's investment platform to be unstable and that there could be significant dilution in the value of Abraaj's limited partners' stakes in the short term.

"Time is of essence given AIML does not have any cash," the report said, adding AIML was reliant on for funding and was accruing operational costs.

Abraaj has been battling allegations by investors including the Bill & and that it misused in the The and IFC have declined to comment on the row.

The dispute has led to a halt in Abraaj's fundraising activities and a series of managerial shake-ups as it tackled ensuing debt repayment problems.

Abraaj's total debt stood at $1.07 billion, the PwC report said, including $501.4 million in unsecured debt and $572.4 million secured debt. It said Abraaj borrowed to cover a liquidity shortfall caused by insufficient management fee income and carried interest between 2014 to 2017.

Once Abraaj's assets have been sold and debts cleared, the remaining value was estimated at $147.7 million, according to the report.

It added that Abraaj's total assets stood at $1.06 billion.

"It should be noted that certain creditors have security positions in excess of the principal debt due," it said.

"In this regard, it is possible that total unencumbered assets available to the provisional liquidation estate exceed this amount."

The report said Colony's offer was $229.3 million to buy the company's management rights and limited partner stakes of six funds and that, as there had been other expressions of interest, provisional liquidators were also looking for alternative solutions to stabilise the platform as quickly as possible.

The PwC report said Abraaj faced three broad outcomes.

One was to continue negotiations with Colony, another was to replace AIML with a new and the third was to discontinue AIML, it said.

The report also said the provisional liquidators had been unable to obtain standalone annual financial statements or management accounts for the company, adding that "it is highly irregular for there not to be standalone monthly management accounting reporting and standalone audit reports."

"This lack of financial record-keeping raises the question of how the company's directors were able to ensure the company was solvent and being effectively managed," it said.

(Editing by Mark and Elaine Hardcastle)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, July 12 2018. 23:27 IST
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