REPORT: The Full Story Behind The Downfall Of The Biggest Investment Company In The Middle East

The biggest private equity firm is going into liquidation after a set of controversial statements and decisions were released against it.

The company, when at its peak in early 2018, had more than AED49.9 billion ($13.6 billion) of assets under management.

The group had an interest in various sectors including consumer goods, healthcare, financial services, education, materials and logistics.

This year in February, four big investors appointed independent investigators to find out more on where the money was disappearing in the healthcare fund. Things have gone downhill since.

They were one of the most celebrated private equity firms among emerging markets

The Abraaj Group, founded in 2002 by Pakistani businessman Arif Naqvi, is an investor operating in the growth markets of Asia, Africa, Latin America, Middle East and Turkey. It’s a Dubai based firm and is (or was) the biggest in Middle East.

But when four investigators began to raise questions, the Abraaj Group chose to hide important information.

Four high-profile investors including the Bill & Melinda Gates Foundation began to ask questions

They were a part of Abraaj’s AED3.6 billion ($1 billion) healthcare fund and requested an audit to know where all their money was disappearing.

As reported by several international sources, after several claims by the Abraaj Group who denied any wrongdoings, the investors recruited forensic accountants to find out what went wrong with the money in the healthcare fund. The final verdict ruled out was that the company may have commingled money in the healthcare fund.

The firm had considered selling major stakes to raise funds

To win confidence of the investors and stabilize the business, all seemed to fail when discrepancies showed up regarding the mishandling of funds and these discrepancies went far beyond just the healthcare fund.

According to a report by Bloomberg, as of March, Abraaj began to slash jobs and downsize its business for a “sustainable growth.”

In the report Naqvi said, “We should have reacted to the kind of questions that investors were asking, arguably, in a different way, the fact that we didn’t, the fact that we took a particular perspective and stuck to that is in hindsight not the smartest thing we could have done.”

The future of Abraaj seems a bit unsure at present

Though Abraaj started repaying its investors, an arrest warrant was issued against Arif Naqvi in Sharjah by Middle Eastern businessman Hamid Jafar over a bounced cheque worth $48 million.

Abraaj agreed to sell its Latin America, Sub Saharan Africa, North Africa and Turkey Funds management business to US Management firm Colony Capital as they’re unable to come up with the debt amount, which is roughly $1 billion since deals have dried up and fundraising is at a halt.

We are pleased to announce a transaction with Colony Capital – a leading global investment management firm – that will provide a comprehensive solution for all stakeholders. Press release here: https://t.co/rdN4eqxpPn

— The Abraaj Group (@abraajgroup) June 21, 2018

The court in Sharjah has dismissed the charges against Arif Naqvi, founder of Abraaj, as Hamid Jafar dropped the case because the two parties settled the matter out-of-court.

The group filed for provisional liquidation so it can give the team time to restructure itself

The company was known to be a more of family office than a powerhouse of private equity.

As reported on Gulf News, Abraaj had asked the courts in Cayman Islands to provide them with provisional liquidators who could supervise their restructuring since they faced allegations of misusing funds.
This move was made a few months after the high-profile investors launched an investigation involving the mismanagement of the $1 billion healthcare fund.

Recently, a number of companies came out to declare their exposure to the private equity firm.

The companies included

• Emirates NBD with AED78.2 million ($21.3 million)
• Air Arabia had AED1.23 billion ($336 million)
• First Abu Dhabi Bank had AED78.6 million ($21.4 million)
• Mashreq Bank had AED66.1 million ($18 million)

These, among many others are at a risk of losing a massive amount of money if the situation of Abraaj doesn’t sort out quick.

What the future holds for the company and its people is still debatable, but if they do survive, it is certain that investors and creditors will want more transparent policies in place when their money is involved.