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Will an Abraaj court case help investors or cast shadows on future deals?

From AMEinfo

Troubled Abraaj Group, which is going for court-supervised liquidation following allegations regarding the misuse of investors’ money, seems to be faced with more problems with each passing day. Now threats of arrest and jail-term are looming over the head of its founder, Arif Naqvi, who is allegedly currently staying in London.

But will court proceedings and potential arrest of Naqvi serve in the favor of investors or will it further jeopardize the operations of the already embattled private equity firm and hem the interests of lenders?

Will it hamper reaching an amiable solutions?

Dr Habib Al Mulla, executive chairman of the Baker McKenzie Habib Al Mulla, who is representing Naqvi’s case in the UAE, said this move could affect the chances of addressing investors’ concerns in a time-bound manner.

“The case has come as a total surprise to us at a time when we were negotiating to settle the matter. The criminal charges and threat of arrest are likely to impact the company’s ability to address the claims of creditors and investors,” UAE-based daily newspaper Gulf News quoted Dr Al Mulla saying this.

Moreover this move could also discourage Naqvi from returning to the UAE to negotiate with lenders to find any consensual solution or other alternative to return their money. According to reports, he is in the UK to avoid any risk of arrest in Dubai.

In a cheque bounce case; a UAE court had issued an arrest warrant against Naqvi last week. This cheque was written as a security guarantee for a $300 million loan.

Woes continue

On the close heels of court’s summons, a former senior employee of Abraaj Group has filed a case with a claim of $2.92 million against the company in the Dubai International Financial Centre (DIFC) Courts.

According to the Bloomberg report, this new case has been filed by Sivendran Vettivetpillai, who is the chief executive officer of a Zurich-headquartered investment firm LGT Impact.

All eyes on Colony deal

Amidst this entire melee, all eyes are glued on the future of Abraaj Group’s recent deals. On June 21, Abraaj Group had inked a pact with New York-listed Colony Capital, Inc., reaching an agreement for the sale and purchase of the Group’s Latin America, Sub Saharan Africa, North Africa and Turkey Funds management business and the Group’s Limited Partnership interests in the underlying Funds.

However, a Cayman Islands court is expected to pronounce its judgment on July 11 on whether to approve the Colony deal or not.

Earlier on June 19, Abraaj Group announced that a Cayman Islands court had approved a request by the buyout firm for a provisional liquidation of the business. In the wake of this, Abraaj’s chairman, Sean Cleary, had resigned stating the appointment of joint provisional liquidators had made his role redundant.

However, UAE-based private equity experts stated that recent court cases could also affect the smooth liquidation of the firm.

Is Abraaj fiasco opening doors for others?

As Abraaj stands on the verge of collapse, this situation is expected to create room for other players to expand their portfolio in the region. One such firm, which is aiming to capitalize on the prevailing circumstances, is Amanat Holdings.

In one of its reports, Bloomberg said that Amanat is scouting for deals as the investment firm seeks to capitalize on the collapse of Dubai-based buyout firm Abraaj Group.

“We want to be number one and now is the real opportunity to gain that position,” Bloomberg quoted Amanat’s managing director Shamsheer Vayalil, as saying.

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