DUBAI: Investors and creditors of embattled private-equity firm Abraaj Group have met in simultaneous meetings in Dubai and London to discuss the future of the Middle East’s largest emerging markets investor, with the possibility of a “fire sale” of assets one of the options on the table.

Abraaj, founded by financial entrepreneur Arif Naqvi in 2002, has been hit by allegations of misuse of funds and an exodus of senior executives since the start of the year. At least one creditor has filed papers to liquidate the Abraaj holding company based in the Cayman Islands.

“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,” a London-based person familiar with the situation said, asking not to be named.

“It is probably best to do it in an organized way, but that is what the meeting will decide.”
One important item on the agenda was the possible sale of Abraaj’s asset management business, with American group Cerberus Capital believed to be in advanced stages of preparation for a deal. A sale would give Abraaj breathing space while it deals with creditors and investors.

Abraaj is believed to owe about $1 billion in secured debt, with further unsecured borrowings of around $400 millio. 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 to other managers and by the closure of specific funds.

In a statement, Abraaj said it had called a private meeting of “shareholders, lenders and other invited parties interested in the restructuring of Abraaj Holdings specifically and other group entities more generally.”

It added that senior management of the company, including Naqvi and Abraaj’s two co-CEOs, Omar Lodhi and Selcuk Yorgancioglu, were briefing creditors and investors “on the progress of discussions with potential acquirers of Abraaj Investment Management, ongoing attractions and other matters that have been the subject of considerable media speculation.

“The purpose of the meeting is to maintain a constructive dialogue with the group’s creditors and to make further orderly progress, in the interests of all stakeholders, toward a consensual resolution of all outstanding issues,” Abraaj said.

One of those at the meeting in Dubai — held at the offices of the law firm Allen & Overy in the Dubai International Financial Center — was Frank Bruno, the co-chief executive of Cerberus. He declined to speak to journalists, as did Abraaj executives.

Before its recent troubles erupted in February, Abraaj was one of the leading investment institutions of the DIFC 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.

Since then, there has been a drip feed of bad news, including the departures of senior executives, further allegations of uninvested funds, and growing concerns over the level of Abraaj’s indebtedness.

Last week it emerged that Kuwait’s Public Institution for Social Security, an Abraaj creditor, had filed papers in the Cayman Islands, where the Abraaj 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, 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.”

IMAGE: Abraaj founder Arif Naqvi stepped aside from investment decisions earlier this year, following allegations of the misuse of $200 million worth of funds. (Getty Images)

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