All you need to know about Abraaj Group's financial crisis

UAE-based Abraaj Group, which has lately seen its financial crisis intensify, is said to have wide exposure to several Dubai and Abu Dhabi-listed companies.

When the company’s crisis first came to light, the UAE government had already been offering much-needed support and stimulus to the business and investment sector.

Arif Naqvi, the Pakistani founder of Dubai’s private equity company Abraaj, had started the firm back in 2002 with a small capital of $50 million, turning it into a well-reputed multi-fund company with assets worth over $13 billion.

At Dubai’s peak prior to 2008, the firm partnered with major local and international banks and invested hundreds of millions of dollars in acquisitions and businesses locally and internationally. The firm acquired a 25 percent stake in EFG Hermes, launching a $2 billion Islamic investment fund for development and infrastructure, selling its shares in previously renowned Maktoob web portal and partnering with Zabeel Investments.

Abraaj has also established investment funds at listed-firms, enjoying an instant coverage of its offered funds, as it gained the trust of investors, backed by an exceptional image created by the media, despite the questionable excessive investments and exits.

Although Abraaj Group is not listed in any national or international equity markets, companies fear for their investments in the group, while lenders are concerned over finance handed over to any of the group businesses, shareholders, or funds.

On June 12, both UAE stock markets sharply declined after news reports stated that Air Arabia had a high exposure to Abraaj. Air Arabia, however, said it had about $336 million in overall exposure to the group. 

Fast-forward to the group's current financial crisis, here’s how it all started:

- Investors including Bill & Melinda Gates Foundation, the World Bank’s International Finance Corp, Proparco Group of France and the UK’s CDC Group, hired independent investigators to look into the Abraaj’s $1 billion healthcare fund, after suspected foul play.

- Investigations found that the Abraaj had mixed the health-care fund’s money with its holding company, and said Abraaj lacks adequate governance. The firm denied any violations and referred to an auditing report carried by KPMG clearing the fund.

- On February 23, Naqvi stepped aside from running the fund. 

- By the end of May, the firm was late to repay a $100 million loan. Kuwait’s Public Institution for Social Security filed a complaint as one of the creditors.

- Creditors, early June, agreed to freeze over $1 billion loans for 90-120 days, but Kuwait’s social security refused.  

- In mid-June, Reuters reported that several investors in Abraaj demanded that Naqvi cuts all ties to the group.

- Abraaj lays-off 15 percent of its employees.

- A court in Cayman Islands approved Abraaj request for provisional liquidation and business restructuring.

- Abraaj froze a $3 billion fund and returned the money to investors.

- The firm also exempted investors from any capital obligations toward its funds.

- By the end of June, the public prosecutor issued an arrest order against Naqvi and another executive over bounced cheques worth hundreds of millions.

- Abraaj sought selling some investments. It received offers from several companies, while others exited these investments.

- Trial of the firm’s CEO started at a Sharjah court for the bounced cheque case. 

- Abraaj co-chief executives Omar Lodhi and Selcuk Yorgancioglu resigned from their positions as board members.

- In mid-June, US asset manager Colony Capital agreed to acquire Abraaj’s Latin American, sub-Saharan African, North African and Turkish fund-management businesses.

- UAE’s Securities and Commodities Authority (SCA) and Dubai Financial Services Authority conducted investigations regarding Abraaj crisis. SCA asks listed-companies to disclose their exposure to Abraaj.

- As of the beginning of this month, UAE-listed companies started to disclose their exposure to Abraaj Group. Air Arabia remains the largest investor in Abraaj.

- A unit of Abu Dhabi Financial Group has offered to buy Abraaj's investment management business.