Emerging markets-focused PE firm Abraaj files for provisional liquidation
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Abraaj Holdings Ltd, an emerging markets-focused private equity firm that has backed Hyderabad-based Care Hospitals and online grocer BigBasket, has filed for provisional liquidation.

Dubai-based Abraaj said in a statement it has filed a petition in a Cayman Islands court to appoint PricewaterhouseCoopers as provisional liquidators for the firm. Abraaj said it had filed the petition with support of the company’s secured creditors.

“The appointment of provisional liquidators imposes a moratorium on the enforcement of all unsecured claims against the company, allowing time for a proposal to be put to creditors for the orderly restructuring of the company,” Abraaj said.

Abraaj Group founder Arif Naqvi said the provisional liquidation, if okayed, will create a more controlled basis for moving forward, without impacting the day-to-day management of the funds and its portfolio firms.

Arun Reddy, managing director at Houlihan Lokey, the financial and restructuring advisers to Abraaj, said a court-supervised restructuring process will enable the company “to meet its obligations in an orderly fashion and facilitate an efficient and satisfactory sale process of its investments, including Abraaj Investment Management Ltd”.

Abraaj was earlier negotiating a deal with creditors for a debt standstill to facilitate a sale to stressed investments specialist Cerberus Capital Management.

A Reuters report on Wednesday said that two creditors—Auctus and Kuwait’s Public Institution for Social Security—had opposed the debt freeze and initiated legal proceedings against the group. The creditors had also sought the firm's restructuring, the Reuters report said.

On Thursday, Arif Naqvi, who started Abraaj 16 years ago, said the past four months have been “humbling, exhausting and testing for all of us."

He added that the process of court-supervised restructuring would take a few months before a new owner emerges.

"An independent AIML, under new ownership, will be stabilising for all who are associated with the asset management business," he said.

Story so far

The firm’s woes became public in February this year when New York Times reported that four Limited Partners in Abraaj’s healthcare fund suspected fund misuse and had sought a forensic investigation of the firm.

UK-based CDC, France-based Proparco, World Bank arm International Finance Corporation (IFC) and the Bill and Melinda Gates Foundation - all investors in Abraaj Growth Markets Health Fund - had appointed Ankura Consulting to investigate misuse.

On its behalf, Abraaj appointed KPMG to also do a forensic audit.

The firm took some steps to pacify investors. In February, it halted fresh fund deployment till the internal review was completed.

The firm’s founder Arif Naqvi also stepped down while it spun off the asset management business into a separate entity called Abraaj Investment Management Limited.

Naqvi said he would limit himself to managing Abraaj Holdings while AIML would be run by the newly-appointed co-chief executives Omar Lodhi and Selcuk Yorgancioglu.

Abraaj also began freeing investors from their commitments into the funds and paused all fundraising efforts. It also emerged that some of the key staff had left the firm several months back and job cuts were round the corner.

The firm announced later that KPMG had cleared all processes and confirmed receipts but this did not satisfy the investors.

A second forensic study by Deloitte Consulting found some evidence of misuse, and not just in the healthcare fund.

In April, Abraaj hired Houlihan Lokey to help with the dispute surrounding the healthcare fund.

Meanwhile, the firm was negotiating with lenders to arrive at a settlement as some peers began evaluating a deal to take over Abraaj’s fund management business. Last month, Cerberus Capital Management had offered to pay $145 million to take over the fund management business.

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