Kuwaiti lender may cancel Abraaj’s debt settlement and force private equity firm into liquidation

A Kuwaiti creditor refuses to agree to a debt settlement deal with Abraaj, which could push the private equity firm to seek interim liquidation, three sources familiar with the matter said.

The Kuwait Public Social Security Institution’s (PIFSS) refusal to join with other creditors in a debt freeze could complicate Abraaj’s efforts to sell his investment management unit to Cerberus New York-based Capital Management, the sources told Reuters.

Abraaj, who bankers estimate has about $ 1 billion in debt, is already grappling with allegations he has embezzled investors’ money. The largest private equity firm in the Middle East and Africa has denied any wrongdoing.

ADVERTISING

Two sources said Abraaj has started preparations to seek interim liquidation, a process in which a court appoints a liquidator on an interim basis before hearing or ruling on a petition to liquidate a business.

A separate source close to Abraaj said an interim liquidation was not her goal and that she was working towards a consensual agreement with secured and unsecured creditors.

Abraaj said in a statement to Reuters that he continues to engage closely with a single creditor, which he has not named, “to achieve a consensual result in the interest of all parties.”

“The company is continuing its discussions on the sale of the fund management business and discussions are at an advanced stage,” said Abraaj, adding that she was working with potential acquirers and other stakeholders “to achieve a positive result “.

Abraaj, who is advised by Houlihan Lokey (HLI.N), said he was focused on reaching a standstill deal with creditors, saying the “vast majority” of them supported the deal. on debt.

Sources said the standstill agreement was necessary to facilitate the sale of its investment management business to Cerberus. But sources said that PIFSS, an unsecured lender, stood firm and was given 48 hours to agree.

The Kuwaiti fund has since informed Abraaj that it intends to pursue a liquidation claim it filed through the Cayman Islands last month, the sources said. The next hearing in the process is scheduled for June 29, one of the sources said.

The Wall Street Journal reported last week that PIFSS had filed a lawsuit in a Cayman Islands court against Abraaj, saying he was unable to repay a $ 100 million, $ 7 million loan. interest dollars.

PIFSS officials were not immediately available for comment. Its management previously declined to comment on an ongoing lawsuit.

A sale of the Kuwaiti creditor’s position to debt funds could help break the deadlock in the process, the sources said.

A number of troubled debt buyers have emerged to potentially buy the debt from the Kuwaiti creditor, two sources said, but said PIFSS was unwilling to sell.

Cerberus, which manages assets totaling more than $ 30 billion, specializes in investments in distressed assets. The US company did not respond to requests for comment from Reuters.

Abraaj faces an investigation by some investors, including the Bill & Melinda Gates Foundation and the lending arm of the World Bank, into how the company used some of their money in its healthcare fund a billion dollars.