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from the same FT journalists that first exposed the off-balance sheet financing, and then were bashed by NMC for it...
London-listed hospital operator’s finances are under intense scrutiny
NMC Health has recently resorted to pledging future credit card payments from customers to secure bank funding, deepening concern over the finances of the hospital operator engulfed by one of the biggest scandals to hit a FTSE 100 company in years.
Public filings in the United Arab Emirates show that NMC, which listed in London in 2012 and has been a member of the blue-chip index since 2017, began raising money this way from Abu Dhabi Commercial Bank at the start of the year.
The group’s main holding companies in Dubai and Abu Dhabi were required to pledge the “credit card receivables” at more than 20 of its hospitals, medical centres or pharmacies as collateral for funds, according to the filings.
The UAE filings show that NMC has not previously pledged its credit card receivables for funding, but has used other forms of receivables financing. Last week NMC pledged “the entire receivables” of its NMC Trading entities to Abu Dhabi Commercial Bank, along with their office equipment and machinery, the filings show.
NMC Trading handles the group’s sale of medicines to pharmacies and its website describes it as “the largest health and distribution company in the UAE”.
The revelation comes just a day after NMC fired its chief executive and warned that an independent investigation into its finances had unearthed arrangements used by its founder and another big shareholder that had not been approved by the board or disclosed to investors.
NMC ordered the investigation by former FBI director Louis Freeh after prominent short-seller Muddy Waters raised “serious doubts” in December about the group’s finances. Trading in NMC shares was suspended on Thursday, and the group has lost two-thirds of its market capitalisation since the Muddy Waters report.
Experts say that so-called credit card receivable financing is more commonly used by small businesses or those that are short of cash. It allows businesses to raise money against payments they are owed by customers. In this case, it could mean that Abu Dhabi Commercial Bank would be repaid from credit card payments tied tied to NMC’s private healthcare facilities.
Dr Orkun Akseli, an associate professor at Durham Law School who has written extensively about receivables finance, said that this form of funding is “generally used by small businesses with little or no credit history” and sometimes from companies that are “having difficulty accessing other types of financing”.
“The company may have maxed out its existing line of credit,” Dr Akseli added. “If the bank says ‘I’m sorry I can’t lend to you any further’, the company may resort to credit card receivables.”
NMC said the company was “focused on providing additional clarity to the market as to its financial position”, but could not comment further because the group is in an offer period following potential takeover interest from GKSD Investment Holding.
Abu Dhabi Commercial Bank did not respond to a request for comment.
NMC filed the pledge on its credit card payments two days before two powerful Emirati shareholders sold off a 15 per cent stake in group, the first of a series of seemingly forced stock sales to satisfy margin calls.
The handful of City analysts who have been sceptical of NMC have questioned why the company was using onerous forms of financing given that it reported having £500m of cash on its balance sheet in June.
James Vane-Tempest, an analyst at Jefferies, on Monday slashed his price target on NMC’s stock in a research note called “Not Much Cash?” that flagged “concerns about accounting, cash flow, and governance”. Jefferies was the only investment bank with a “sell” recommendation on NMC’s stock prior to the Muddy Waters report.
Jefferies and Muddy Waters have both homed in on NMC’s use of supply-chain finance, a form of borrowing against supplier payments that accountants do not class as debt. Greensill Capital, a SoftBank-backed company that says it is “changing finance to change the world”, has arranged some of this funding for NMC.
The disarray at the company has been building in recent weeks. Earlier this month, the company’s founder BR Shetty and fellow shareholder Khalifa al-Muhairi quit the board after NMC admitted that a convoluted tangle of deals and share pledges between its largest investors left it unable to say who owns large chunks of its stock.
The filings on the credit card facilities also list one of NMC’s Emirati shareholders Saeed al-Qebaisi as a “grantor” in the deal. The company’s accounts have previously shown that the businessman personally guarantees some of NMC’s “short-term borrowings” — along with Mr Muhairi and Mr Shetty.
In December, the Financial Times reported that NMC had held talks to raise hundreds of millions of dollars of off-balance sheet debt to fund new hospitals. The company claimed the article was based on “false information”.
While NMC was not able to complete the €200m debt deal, draft documents seen by the FT show that Mr al-Qebaisi would also have been personally involved in the financing.
The Dubai companies register shows a special-purpose vehicle listed in these documents has its offices in the “Malek Saeed Butti Al Qubaisi Building”.
A spokesperson for Mr al-Qebaisi did not respond to a request for comment.
I get it adzy.
They've no money, major debts, governance rotten to the core........
I can't find any positive angle. Money is gone.
wow oh wow:
"Last week NMC pledged “the entire receivables” of its NMC Trading entities to Abu Dhabi Commercial Bank, along with their office equipment and machinery, the filings show."
"NMC filed the pledge on its credit card payments two days before two powerful Emirati shareholders sold off a 15 per cent stake in group, the first of a series of seemingly forced stock sales to satisfy margin calls"
The company clearly has no money to be acting like this!
Hereshopin - don’t think you are far off!
Tinatots - when last week me n others was saying how much of a shafting shareholders were gonna get IF foul play dodgy accounting etc had occurred and that it could get suspended ... well here’s the suspension the shafting comes later
This is looking like another polly peck.
Hey Mark, thanks for your "I told you so" contribution. Exactly what shareholders need right now.
Bellevue, Blackrock and Clermont increased further yesterday.
Little did they know, little did we know.
yeah, i find it kind of shocking that none of these IIs saw this coming... but then again they wouldn't have been able to talk to management given the "offer period" they are in following takeover interest from GKSD... was that all a smokescreen from Kamel Ghribi to allow Shetty to offload?? ... odd that GK Invest's website suddenly went "under maintenance" after they announced their so-called bid...
adzy, do you see any thin possible outcome here?
I'm afraid I just can't see it coming back out of suspension... not this year anyway.
More and more skeletons are going to now come out, and if these credit card receivables are true it would seem like the company and/or it's founders were very acting desperate, even pledging the office equipment as collateral (!)
To do that can only mean the company is massively in debt, has somehow exhausted all other forms of finance and is on its last legs... the bond price collapse is also telling, which indicates to me that there is simply no equity value left for shareholders as things stand...
Thanks.
To make matter worst: "Bank of America cutting its growth forecasts to an 11-year low".
Not good time to invest in any market.
Hey Tina honey, here is some language for you to understand....YOU LOST YOUR MONEY BABE
That's technical outcome. But what IIs would do can't be predicted. They surprised us from 500s to 900s. Even you adzy went long from short.
If this was a retailer, I would have completely written this off. But being a leading healthcare provider, may offer a small glimmer of hope.
Tina - there's no way you managed to get 35K at 5.13p... i tried to buy 10K worth for hours and it kept going into auction... any proof to show your profits?
Whats future medical? Never heard of it.
Thanks for the detail Tina/mattcookson..at least you can afford to replace your mums pants
Sounds like a bargain Tina/Matt I could use them as a hammock for my pet elephant
Adzy, could you really believe someone who is Tina here and mattcookson on adfvn?! Haha
Morgan Stanley increased their holding on 25/02.
Little did they know, little did we know.
LOL... yeah i noticed that, Tina/Matt is a confused child.
looks like morgan stanley actually sold?
Resulting situation on the date on which threshold was crossed or reached
Below 3%
Position of previous notification (if applicable)
5.12%
Hi Tina could you paste info cant access it. All I know is even after being sacked look how he's talking about nmc. Like its the next apple share lol. I love it
Tina its because they copy our posts and paste them there. So these lot think we have the time to do double postin