UAE businesses and listed companies have an exposure of up to $1 billion to Abraaj Group, which is struggling to regain investor trust in the wake of a criminal case filed against its founder Arif Naqvi in a Sharjah court last month.
Sources said some of the major listed companies have big exposure to the struggling group which allegedly misused investor money in a healthcare fund. The firm has denied the allegations.
According to the sources, Commercial Bank of Dubai, Mashreq Bank, Societe Generale and Commercial Bank International are among secured lenders who have a significant exposure to the embattled group, while Kuwait Pension Funds and Actus Fund figure on the list of unsecured lenders.
"Commercial Bank of Dubai and Mashreq Bank have up to $500 million combined exposure, which is one of the largest after Air Arabia which disclosed $336 million worth of exposure to Abraaj in June," the sources said.
When contacted, Commercial Bank of Dubai declined to comment on the exposure while a Mashreq spokesperson was not available to comment at the time of going to press.
On Tuesday, Abu Dhabi-listed companies announced disclosures in line with the directive of the market regulator Securities and Commodities Authorities to declare exposure to one of the biggest buyout funds of the Middle East.
First Abu Dhabi Bank said it has direct exposure to Abraaj through a fully secured three-year loan of $21.4 million, which is due to mature in April 2019. The Sharjah-based United Arab Bank confirmed an exposure to two entities of Abraaj Group but didn't disclose the amount.
In a filing to Abu Dhabi Securities Exchange, Al Buhaira National Insurance Company disclosed Dh8.4 million, Emirates Insurance acknowledged $2.45 million and Waha Capital mentioned an indirect exposure through Aqua Consortium where Waha owns a 49 per cent stake in the company while rest 51 per cent is held by Abraaj. Al Qudra Holding also said it has an indirect exposure of Dh61.6 million.
Abu Dhabi Commercial Bank, RAK Bank, RAK Properties, RAK Ceramics, Invest Bank and Julphar Gulf are some of the notable names who have no exposure to Abraaj, according to filings to the Abu Dhabi Securities Exchange.
Global equities strategist and fund manager Matein Khalid said the criminal conviction of Abraaj's founder in the UAE is both tragic and problematic.
"Why did a private equity firm that earned two per cent on almost $14 billion in assets under management need to borrow $1 billion or co-mingle investor funds without their knowledge or consent," Khalid questioned.
He said the liquidation of a global private equity firm is a rare event. "This one will be compounded by the divergent interests of different types of creditors, and shareholders. Multiple regulators and legal jurisdictions will make a resolution difficult," he said.
The Sharjah court will resume hearing of case against Arif Naqvi and another executive for issuing a dud cheque of Dh177.1 million to Hamid Jafar, another founding shareholder in the group.
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