RE: tNMC Health pledged credit card payments to raise bank funds - he skeletons keep coming out27 Feb 2020 14:56
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.
Sign In
Follow the stocks
