Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
The primary role of the board is to protect the shareholders interest.
They must also think that a debt restructure would preserve more shareholder value than a rights issue.
Is this a positive signal? In the first instance it means that NMC is not a complete fraud. Secondly it means that management think it's possible to continue as a going concern with some debt restructuring.....perhaps buy in from sovereign wealth fund will help.
Does it also imply that income is as stated with biggest issue being too much leverage?
NMC Health Plc hired Moelis & Co. to advise on a debt restructuring, Reuters reported, citing people familiar with the matter.
If this was a complete fraud than why has that info not been shared yet? I expect it wouldn't take long for Freeh to discover that.
If it's not a complete fraud then clearly there has been improper use of company funds which would explain the length of the investigation. They're trying to find where the money trail leads.
Company valuation will depend on cash in bank and earnings growth Vs how levered the company is ST and LT debt. We won't know that until the review is over.
If they can force out the Bhuttis and Shetty by forcing them to sell their positions to the fund then other share holders could be protected. It would also mean from a regulatory point of view the company could continue to operate. Without the baggage of poor governance NMC price could do well but also depends if the earnings are credible.
Abu Dhabi wealth fund Mubadala Investment Co. is considering a potential investment in NMC Health Plc -- a sign the emirate is keen to address the worsening crisis at the troubled hospital operator, people familiar with the matter said.
Mubadala has held early discussions to look at a range of options regarding the Middle East’s largest health care provider, including buying a stake and taking a board seat, the people said, asking not to be identified as the matter is private.
While discussions are ongoing, there can be no guarantee of a transaction given the complex issues facing the company, the people said.
Representatives for Mubadala and NMC declined to comment.
NMC’s troubles began in December when short-seller Muddy Waters released a report alleging a range of irregularities at the business, which the company has denied.
NMC commissioned an independent review in January, led by former FBI Director Louis Freeh. Interim findings given to the board on Wednesday revealed more financial liabilities, and the company fired its chief executive officer Prasanth Manghat last week.
The company’s stock price has been on a free-fall following the report. It was suspended from trading on Thursday as the company sought to provide “clarity to the market as to its financial position.”
Aside from Mubadala, investors linked to Italian hospital operator Gruppo Ospedaliero San Donato Spa have said they’re studying a possible offer for the company and are working with financial advisers. KKR & Co has said it’s not making an offer for the business after NMC said it received an approach from the buyout firm.
NMC was founded by Indian entrepreneur Bavaguthu Raghuram Shetty in 1975. Before the Muddy Waters report, NMC’s shares, part of the FTSE 100 Index, had risen more than 12-fold since listing in London eight years ago. They peaked in 2018 after joining a select group of companies in the Arab world worth more than $10 billion.
Reading between the lines my guess is he was fired because he would have been the one who signed off on the supply chain finance. Probably some improper use of company funds too.
adzy, thanks for pulling those figures together. You are correct....that should be more than enough to cover the debts. However, that's a rational chairman would operate to protect the company from the mess he's created. We have to assume that Shetty and the butty's are only interested in protecting their own wealth. I wouldn't put it past them that they fire sold their shares to line their own pockets whilst leaving NMC holding the can. I could be wrong and the banks did indeed sell to cover margin calls.
Crucially, the CEO will need to restructure debt and find new lines of short term debt. If they can do that and Executive, Board are now truly aligned in terms of objective then this company could continue as a going concern.
I can't see NMC getting any credit from the usual sources but, If they could get credit from one of the royal families then that really would be the turnaround for this company, clearly that is a big "if". Why would the royal families want to help, well, a couple of reasons are: It's the largest health care provider in UAE and that it has several thousand employees that potentially could be out of work. From an equity holder point of view this would be ideal....it would show that NMC has a new credible backer and so bring confidence back to the company. Crucially it means it could remain listed.
The other option is for NMC to raise capital through a rights issue and by my calculations if they needed 500M then it would about 50p - 60p per share, inclusive of the cost of raising. This would also mean that equity holders positions still have value and the company could remain listed.
Finally, NMC could sell to either one of the Royal families or another private bidder. They would have to negotiate a cut to the debt with creditors but would ultimately take it over on the condition that they buy the company for nominal sum, £1. Buyers may be difficult to find because of class action suits going on.
I see those things happening respectively depending on how bad the "rot" is in terms of undeclared debt and low cash reserves. From good to bad.
Would be good to know what other people think on my points and if they have suggestions on how a CEO could manage this situation.
Couple of things to note.
If ST debt is significantly higher than cash then this company really will struggle to find lines of credit that will allow it to continue its business. My concern is that cash is severely depleted because otherwise it would have already been confirmed by Freeh.
Having said that I don't think all is lost but a lot will be riding on how good the new CEO is.....can he find new lines of credit. Also, could there be a rights issue that would allow the company to restore it's cash balance, should it be severely depleted. Things are not looking good but It's not complete game over yet.