NMC sues Dubai bank in $6 billion UAE debt row
The United Arab Emirates' largest private healthcare provider NMC is suing a Dubai bank in Abu Dhabi courts, three sources said and a court document showed, in a dispute that could complicate the company's multibillion-dollar debt restructuring and potentially delay payouts to creditors.
The healthcare company ran into trouble last year after the
disclosure of more than $4 billion in hidden debt.
Its UAE operating businesses were placed into administration
in the courts of Abu Dhabi’s international financial centre ADGM. Claims from
creditors to date amount to $6.4 billion, the company has said.
The legal action by NMC's administrator against Dubai
Islamic Bank (DIB) comes after DIB filed lawsuits in neighbouring Dubai. The
lawsuits pit UAE's different legal systems against one another and risk
complicating the restructuring.
"So which court takes priority now?" one of the
sources said. "The problem is that none of this has ever been done
before.” The sources declined to be identified because of the commercial
sensitivity of the matter.
NMC's lawsuit seeks to give its administrators, Alvarez
& Marsal, power over securities claimed by DIB and possibly use them to pay
other creditors, the sources and the court document seen by Reuters showed.
Pending a full account of the receivables to the
administrators and payment by DIB of the proceeds, "the joint
administrators shall be entitled to withhold any distribution or payment that
would otherwise be due to DIB from the estate of the companies, or other
property in the hands of the joint administrators," the court document
said.
That could leave DIB, which has an exposure of over $400
million to NMC, out of pocket. NMC had secured loans from DIB using collateral
known as insurance receivables, which relate to payments by insurance companies
for medical treatment.
DIB has already sought rights over those securities in cases
filed in neighbouring Dubai, three sources close to the matter said.
ADGM told Reuters it does not comment on ongoing court
proceedings. Alvarez & Marsal, which has been appointed as administrator of
NMC, declined to comment. DIB did not respond to a request for comment.
The UAE's legal system has both onshore and offshore
jurisdictions. The onshore courts use UAE law, while the Abu Dhabi Global
Markets courts and the courts of the financial free zone Dubai International
Financial Centre (DIFC) are modelled on the English judicial system.
"You have a situation where you have facilities granted
by banks secured by security - for example assignment of receivables - governed
by the UAE, onshore law ... and then you have the companies redomiciling in
ADGM, in an English style process," said one of the sources, speaking
anonymously for commercial sensitivities.
Courts in the Dubai International Financial Centre and Abu
Dhabi onshore courts have recognised Alvarez & Marsal's role as
administrator for NMC.
It is planning to submit a request to have the
administration recognised in Dubai onshore courts, it said in an update last
week.
The administrator has said this process would help to
protect and maximise NMC's assets for the benefit of creditors.
The Dubai and UAE federal governments did not immediately
comment.
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