Abraaj seeks ‘standstill’ agreement with creditors over debts

Abraaj Group, the embattled Dubai-based investment firm, is seeking a “standstill” agreement from some of its creditors, as it seeks to win time to resolve its increasingly pressing financial problems.The announcement came following a day of negotiations with creditors and investors in the UAE and in London on the future of the private-equity firm, which has been hit by allegations of misuse of funds and an exodus of senior executives. At least one creditor has filed papers to liquidate Abraaj’s holding company, based in the Cayman Islands.
A standstill agreement is a deal reached between creditors and a debtor to delay repayment of interest and debts, until a full restructuring can be agreed.
Abraaj said in a statement issued late on Monday: “We are pleased with the outcome of today’s meeting and the constructive support we have received from our secured creditors in enabling us to move forward and resolve outstanding issues.
“The secured creditors are expected to imminently conclude a standstill which will provide Abraaj the ability to meet its obligations in an orderly fashion. We are grateful for the support of our secured lenders and look forward to working collaboratively with them in the weeks ahead,” it added.
The meetings also discussed the potential sale of Abraaj’s fund management business, the company said.
The discussions were led by Arif Naqvi, who founded the firm in 2002, current co-chief executives Omar Lodhi and Selcuk Yorgancioglu, as well as a number of specialist advisers, “to provide the attendees with the fullest possible understanding of progress made in recent weeks and the current status of the group,” the statement added.
“The meetings are about whether creditors want to have a managed return of funds or they want to do it in an un-managed way, for example via a fire sale of assets,” said a London-based person familiar with the situation, who asked not to be named.  
“It is probably best to do it in an organized way, but that is what the meeting will decide.” American group Cerberus Capital is believed to be in advanced stages of preparation for a deal to buy the fund management business.
Abraaj is believed to owe about $1 billion in secured debt, with further unsecured borrowings of around $400 million. Its last reported statement of assets under management amounted to $13.6 billion, but this is believed to have been significantly reduced by the transfer of some debt to other managers and by the closure of specific funds.
One of those at the meeting in Dubai — held at the offices of the law firm Allen & Overy in the Dubai International Financial Centre — was Frank Bruno, the co-chief executive of Cerberus. He declined to speak to journalists, as did the Abraaj executives.
Before its recent troubles erupted in February, Abraaj was one of the leading investment institutions of the Dubai International Financial Centre and the biggest emerging market investor in the region.
The revelation that some investors, including the Bill and Melinda Gates Foundation and a unit of the World Bank, were concerned about an alleged misuse of $200 million of funds allocated to one of Abraaj’s health care funds, led to investigations and the “stepping aside” of Naqvi from investment management decisions.
Last week it emerged that Kuwait’s Public Institution for Social Security, an Abraaj creditor, had filed papers in the Cayman Islands, where Abraaj’s holding company is registered, seeking a liquidation order over unpaid debts.  
Abraaj is regulated in the UAE by the Dubai Financial Services Authority, the DIFC’s watchdog. In a statement, the DFSA has said it was monitoring the situation.
“The DFSA is aware of various matters involving Abraaj Group, which has a regulated entity in the DIFC and relevant matters are under our attention,” the regulator said in a statement.
“The DFSA cannot comment further on circumstances of individual firms."