By Sarah Townsend From The National

The move by Kuwait’s Public Institution for Social Security risks complicating ongoing restructuring negotiations

One of the creditors of Abraaj Group, the buyout firm facing allegations of misusing investors’ funds, has filed a petition in a Cayman Islands court seeking liquidation of the company – a move that threatens to disrupt debt standstill talks with other Abraaj creditors and its bid to sell part of its business. Kuwait’s Public Institution for Social Security (PIFSS), an unsecured creditor of Abraaj, on June 6 filed the petition in the Grand Court of the Cayman Islands, where Abraaj Holdings is registered, according to a notice in the Cayman Gazette, which lists legal cases. A secured creditor is a lender or creditor that extends capital or is associated with an investment that is backed by collateral.

“The funds invested in Abraaj Holdings belong to the hard working people of Kuwait who have entrusted us to invest their monthly savings so that they can retire comfortably when they decide to,” said PIFSS director general Hamad Al Humaidhi in a statement. “We have a legal, fiduciary, and an ethical responsibility to see this case through till the end and return these funds, and secure the best possible outcome for our subscribers and pensioners.”

The PIFSS decision to file the petition follows Abraaj’s default of a $100 million loan that was due on June 3. PIFSS, which started its relationship with Abraaj in 2004 and by 2013 had made $731.8m in investments and loans to the firm, has since gotten back $346.2m from the private equity company.

Abraaj, the biggest Middle East private equity firm, is in talks for a credit freeze agreement with its secured creditors, however, the court proceeding may create problems for the company.

“The hearing raises the prospect of a court-ordered liquidation regardless of the consensual standstill agreement with other creditors,” said Khalid Howladar, managing director of credit and sukuk advisory Acreditus.

Abraaj acknowledged the filing in an emailed statement on Thursday. “We are aware of the filing in the Cayman Islands by a single creditor and we continue to engage closely with them to reach a consensual outcome for the benefit of all parties,” the statement said.

The Middle East’s biggest buyout company, which at its peak had more than $13.6 billion (Dh49.96bn) of assets under management, is reeling from allegations of misusing funds in a healthcare investment vehicle that deployed capital from investors including the Bill & Melinda Gates Foundation, the World Bank’s International Finance Corporation, the UK’s CDC Group and Proparco Group of France.

The Wall Street Journal and The New York Times in February claimed around 24 investors in the $1bn Abraaj Growth Markets Health Fund had hired investigators to find out what had happened to some of the money invested in the fund. Abraaj denies any wrongdoing.

The allegations have snowballed since then and the group is trying to reorganise its business, and sell its funds management unit along with its stakes in other companies to resolve liquidity issues. New York-based Cerberus Capital Management is among the potential buyers, according to reports.

Abraaj met key stakeholders and creditors on Monday to discuss the potential sale and debt restructuring and said it was pleased with the outcome. “Secured creditors are expected to imminently conclude a standstill which will provide Abraaj the ability to meet its obligations in an orderly fashion,” the group said in a statement at the time.

IMAGE: Abraaj Group chief executive Arif Naqvi is overseeing a restructuring of the stricken private equity firm, which is facing allegations of misuse of investors’ funds. In the past week, one of its creditors, the Kuwait-based Public Institution for Social Security, filed a request to liquidate the company in the Grand Court of the Cayman Islands, where Abraaj is registered. A hearing is scheduled for 29 June. Courtesy of World Economic Forum

For more on this story go to: https://www.thenational.ae/business/markets/kuwaiti-creditor-seeks-abraaj-liquidation-in-cayman-court-1.737795