“The British investment manager’s approach excludes any acquisition of NMC Health, the London-listed holding company that was placed into administration last month after months of turmoil, one of the sources said”
What does this actually mean?
They can run the hospitals without taking on the debt of the group? Sounds a bit odd
Wouldn't read too much into this, the impairment write down is just them following IFRS.
"It is important to note that provisions related to NMC Health Group, Finablr and associated companies are taken in accordance with international accounting standards and do not equate to a write-off of this amount. ADCB will pursue all possible avenues and legal routes to recover these funds and to uncover how the fraud was conducted," said Eraiqat"
The central tenet of any due diligence process begins with a company’s audited regulatory filings, which contain a statement from the auditor attesting that they reflect a “true and fair view” of the entity. Unfortunately, this turned out not to be the case for one of our investments.
In the case of NMC, the group’s indebtedness was grossly understated to the tune of $4.5bn (actual debt of $6.6bn vs. last reported of $2.1bn as at 30 June, 2019) with such deception remaining undetected and going back to at least early 2018. In the UK, the FCA has launched a formal investigation and criminal proceedings have been launched both in the UAE and in the UK.
Clearly NMC’s directors, management and auditors (E&Y) will have questions to answer. Along with numerous others, BBH is unfortunately also a victim of this crime.
The Trust has held a position in NMC since May 2019 and. We were aware of questions about governance and accounting then, and subsequently, but we felt these concerns were reflected in NMC’s share price, making it a well positioned play on expansion of developing market healthcare provision. Indeed, this holding generated a positive return for investors during FY2019.
However, on 26th February NMC announced the uncovering of significant accounting discrepancies and that the CEO had been dismissed. The shares were subsequently suspended the following morning, before the market open.
During March, as the full extent of the fraud became clear, the valuation of the Trust’s holding in NMC was progressively impaired by BBH’s board, such that it represented 0.7% of the Trust’s gross investments at the end of March (having
peaked at 3.0% of gross assets in September 2019). At that time, discussions were continuing around a debt re-negotiation and recapitalisation. However, on 9th April, NMC was placed into administration and the stake’s value has now been written down to zero.
This is a very disappointing outcome and is a reminder of the limitations of due diligence and audited accounts in the face of criminality. We will not report NMC as an active position moving forward, but will continually evaluate potential value recovery strategies for the Trust as the legal picture becomes clearer.
mrD - good point on the bookbuilders... interestingly it was the same banks who the Buttis supposedly owned debt too that did the bookbuild! I completely missed that!
"Mr Saeed Butti Al Qebaisi and Mr. Khaleefa Butti Al Muhairi intend to reduce outstanding indebtedness of themselves and other corporate entities owned by them under borrowings raised by Nov Partners Investment Limited, entered into with, among others, Credit Suisse AG and Deutsche Bank (the "Borrowings"). This shall be effected through the launch of two accelerated bookbuild offerings to institutional investors.
The Joint Global Coordinators and Joint Bookrunners for the Transactions shall be Credit Suisse Securities (Europe) Limited ("Credit Suisse") and Deutsche Bank AG. "
Rastuss - i'm sure index funds do own some, but judging from the shareholder list it's very little of the free float. The majority is owned by active money managers.
For example the iShare FTSE 100 tracker is one of the largest ETFs with $7bn in assets.
From their annual report of 2019, NMC in Feb 2019 was only 0.13% of that ETF... this represented a holding of 304,156 shares (around $8m worth) of NMC, which at the time was <0.2% of NMC's market cap... there's probably other passive funds that invest in FTSE 100, but I believes iShares is one of the largest...
Rastuss: incorrect again. Wellington and Capital don’t manage passive. You need to look through regulatory filings to find which funds they are held in. For example for Capital Group their 12% ownership for NMC was in their active europacific fund.
Google the data for UK. it’s nowhere near the same. But like I said just look though the shareholder list for nmc and you’ll see my point..
While passive has been winning share for sure, index funds own 14% share of the US stock market. (Up From 7% in 2010). Source WSJ. The trend is nowhere near the same in the UK.
Regardless it differs vastly comply by company. As you know, nmc only had around 40% free float (before margin calls). Of that the top shareholders were wellington management, capital group, Hermes, norges etc. These are all active money managers. Even for blackrock if you dig in to the underlying funds in which the security was held it was their active funds which held nmc, not their passive tracker. Hope that helps.
Rastuss - "Re institutional investors, many of these will be index funds"
This is not correct.
Look at the shareholder list and the funds in which NMC was held in.
The vast majority were ACTIVE funds controlled by a fund manager with explicit responsibility for due diligence in this fraud.
Passive index funds made up a minor amount of the float.
“ Any such orders would put these businesses, their employees and their ability to operate and meet ongoing supply at serious risk, and especially at such a critical time given the current public health issue," the spokesman added...
The cheer audacity for them to say this!! Wow! They should have thought of this before they committed the fraud!!!