AIR ARABIA APPOINTS ADVISERS TO PROTECT ABRAAJ INVESTMENT
▶ Airline’s stock tumbles on news of connection with embattled private equity company
Air Arabia, the Sharjah low-cost airline, said it appointed advisers to protect its investment in ailing private equity company Abraaj Group, which last week filed for provisional liquidation.
Dubai-listed Air Arabia, which holds an undisclosed investment in an Abraaj fund, saw its stock fall by as much as 7 per cent by close of trade yesterday, amid news of its investment in Abraaj.
“As part of the Air Arabia Group investment portfolio, the carrier has an investment in Abraaj funds,” a spokeswoman for Air Arabia told The National.
“Air Arabia has appointed a team of experts who are actively engaged with all stakeholders and creditors involved with the matter to ensure Air Arabia’s investment and business interest are protected.” The spokeswoman declined to say if a sale of Abraaj stake was being explored.
The airline was the worst performer on the Dubai Financial Market yesterday, with its share price falling to a low of Dh1.05.
Abraaj founder and chief executive Arif Naqvi is one of the airline’s board directors, according to Air Arabia’s website.
Abraaj declined to comment on the connection with Air Arabia when contacted by The National. According to Abraaj’s website, the company invested in the airline in 2007, but there were no further details on the size of the investment.
“Due to the fact that Abraaj owns shares in Air Arabia, investors are concerned about a possible sell-off due to the provisional liquidation and debt restructuring with lenders,” said Tariq Qaqish, managing director of asset management at Dubai financial services company Menacorp.
Abraaj last week filed for provisional liquidation in the Cayman Islands, where it is registered, as it seeks to limit the fallout from allegations of misuse of investors’ funds, which have sparked legal battles with some of its creditors. The move comes as one of its unsecured creditors, the Kuwait Public Institution for Social Security, earlier this month filed a petition in the Cayman Islands Grand Court seeking liquidation of Abraaj after it defaulted on a $100 million (Dh367.3m) loan due on June 3.
A secured creditor is a lender or creditor that extends capital or is associated with an investment that is backed by collateral. Auctus Fund is the second creditor this month to file a lawsuit against Abraaj, according to a Reuters report.
The Middle East’s biggest buyout company had more than $13.6bn of assets under management at its peak. It came under fire this year with allegations of misusing funds in a health care investment vehicle that deployed capital from investors including the Bill & Melinda Gates Foundation, the World Bank’s International Finance Corporation, the UK’s CDC Group and France’s Proparco Group.
The Wall Street Journal and The New York Times claimed in February that around 24 investors in the $1bn Abraaj Growth Markets Health Fund had hired investigators to find out what had happened to some of the money invested in the fund. Abraaj denies any wrongdoing. The group is now trying to reorganise its business and sell its funds management unit, and some of its stakes in other companies, to resolve liquidity issues.
Summary findings of a review by Deloitte, which was hired by Abraaj to examine its business earlier this year, showed that a cash shortage led the firm to “commingle” investor money with its own money, according to a document seen by Reuters.
As allegations mounted, Abraaj met its creditors earlier this month to reach a standstill deal, which the company said was backed by the vast majority of its secured creditors.
Air Arabia posted a 5 per cent rise in net profit for the first quarter of this year, beating analysts’ forecasts.