The Abraaj Group, once the largest private equity firm in the Middle East, is close to reaching a key milestone in the troubled company’s ongoing restructuring in the Cayman Islands.
Abraaj’s provisional liquidators are finalizing the sale of assets that may allow Abraaj to avoid being wound up, according to statements made Wednesday in Grand Court.
The Abraaj Group allegedly owes creditors some US$1 billion and has been accused of misusing hundreds of millions of dollars, including funds from the Bill & Melinda Gates Foundation and the World Bank’s International Finance Corporation.
Abraaj’s largest creditor, Kuwait’s Public Institution for Social Security, has filed a petition in the Grand Court for the company’s Cayman entities – Abraaj Holdings and Abraaj Investment Management Ltd. – to be wound up and liquidated.
However, Abraaj’s provisional liquidators – Deloitte and PricewaterhouseCoopers – have successfully lobbied the court to delay that winding-up petition and allow them more time to restructure Abraaj’s assets.
At the latest court hearing on Wednesday, attorneys for the provisional liquidators said they were close to completing the sale of investment-management rights to funds in several regions throughout the world.
Currently, Abraaj is in the post-sale process for its Latin American assets. The Los Angeles-based investment management firm Colony Capital announced last month that it is buying these assets, which would give Colony the management rights to more than US$500 million across 22 investments in Latin America.
The sale of rights to manage other funds in Africa and Southeast Asia are also proceeding, representatives for Deloitte said at Wednesday’s Grand Court hearing.
Other funds, primarily focused in Turkey, will likely be wound up, as Abraaj Investments has not been successful in finding buyers so far, representatives for Deloitte said.
The sale of Abraaj’s investment-management rights are expected net the company around $8 million and help it unload loss-making funds from its books. The sale will also allow Abraaj to improve its liquidity and keep its equity-stake in other funds – Abraaj has not been making the necessary capital contributions to these funds, but may be able to do so after the sale, according to statements made in court.
In addition to its investment-management rights, Abraaj is also proceeding with its sale of its largest asset, the Karachi-based power company K-Electric, to a Chinese buyer. Not much about this transaction was discussed in court due to its commercial sensitivity, but a sale has been agreed to and can hopefully be finalized within six months, according to Deloitte.
Abraaj’s provisional liquidators asked Grand Court Justice Robin McMillan to adjourn Kuwait’s Public Institution for Social Security’s winding-up petition against Abraaj for six more months, in order to give them more time to finalize the sales and restructure Abraaj.
An order to wind up Abraaj would likely collapse the value of its assets and jeopardize the sale of its fund-management rights, the provisional liquidators argued. The same would hold for the sale of K-Electric, they said.
Justice McMillan granted the six-month extension of the restructuring of Abraaj, but noted that he has already granted three previous extensions. He asked the provisional liquidators whether they anticipate that this will be the final extension, and both parties said yes.