Oh dear! NMC Healthcare has 'discovered' an immodest $2.7 billion of undisclosed and unapproved debt which in aggregate now totals a sizable $5 billion (AED 18.4 billion) - more than twice that previously declared…
Where there's smoke there's an inferno, I think the saying goes. Kudos to Muddy Waters Research, they should get a prize for uncovering from the outside what supposed auditors EY couldn't seem to do from the inside. Maybe having the ex-Head of EYs Middle East operations on NMC's Board (now 'resigned') was a contributing factor to the governance/audit failure, what do you think?
Anyhow, Mubadala , GKI and DAMAC Properties mercurial CEO Hussein Sajwani are all in the bidding. I would hypothesize, with this new leverage, only with our local sovereign wealth fund ownership, can the lenders/creditors:
(i) legitimately and significantly cut NMC's cost of borrowing - with the net effect of maintaining a stable Debt Service Coverage Ratio and preserving precious cashflow for operations.
(ii) get a sizable maturity extension given AA credit quality.
(iii) reduce the associated capital charge for the exposure and the last cherry.
(iv) a phoenix-like investment grade credit rating.
Even if the lowest bid, Mubadala offers best hope for long term recovery in equity value for beleaguered shareholders.
P.S. Meet the man - Carson Block - who took down UAE’s NMC Health
Khalid Howladar is the Senior Managing Director and Head - Credit & Sukuk Advisory at R.J. Fleming & Co.