NMC Health pledged credit card payments to raise bank funds
London-listed hospital operator’s finances are under intense scrutiny
NMC Health has recently resorted to pledging future credit card payments from customers to secure bank funding, deepening concern over the finances of the hospital operator engulfed by one of the biggest scandals to hit a FTSE 100 company in years.
Public filings in the United Arab Emirates show that NMC, which listed in London in 2012 and has been a member of the blue-chip index since 2017, began raising money this way from Abu Dhabi Commercial Bank at the start of the year.
The group’s main holding companies in Dubai and Abu Dhabi were required to pledge the “credit card receivables” at more than 20 of its hospitals, medical centres or pharmacies as collateral for funds, according to the filings.
The UAE filings show that NMC has not previously pledged its credit card receivables for funding, but has used other forms of receivables financing. Last week NMC pledged “the entire receivables” of its NMC Trading entities to Abu Dhabi Commercial Bank, along with their office equipment and machinery, the filings show.
NMC Trading handles the group’s sale of medicines to pharmacies and its website describes it as “the largest health and distribution company in the UAE”.
The revelation comes just a day after NMC fired its chief executive and warned that an independent investigation into its finances had unearthed arrangements used by its founder and another big shareholder that had not been approved by the board or disclosed to investors.
NMC ordered the investigation by former FBI director Louis Freeh after prominent short-seller Muddy Waters raised “serious doubts” in December about the group’s finances. Trading in NMC shares was suspended on Thursday, and the group has lost two-thirds of its market capitalisation since the Muddy Waters report.
Experts say that so-called credit card receivable financing is more commonly used by small businesses or those that are short of cash. It allows businesses to raise money against payments they are owed by customers. In this case, it could mean that Abu Dhabi Commercial Bank would be repaid from credit card payments tied to NMC’s private healthcare facilities.
Dr Orkun Akseli, an associate professor at Durham Law School who has written extensively about receivables finance, said that this form of funding is “generally used by small businesses with little or no credit history” and sometimes from companies that are “having difficulty accessing other types of financing”.
“The company may have maxed out its existing line of credit,” Dr Akseli added. “If the bank says ‘I’m sorry I can’t lend to you any further’, the company may resort to credit card receivables.”
NMC said the company was “focused on providing additional clarity to the market as to its financial position”, but could not comment further because the group is in an offer period following potential takeover interest from GKSD Investment Holding.
Abu Dhabi Commercial Bank did not respond to a request for comment.
NMC filed the pledge on its credit card payments two days before two powerful Emirati shareholders sold off a 15 per cent stake in group, the first of a series of seemingly forced stock sales to satisfy margin calls.
The handful of City analysts who have been sceptical of NMC have questioned why the company was using onerous forms of financing given that it reported having £500m of cash on its balance sheet in June.
James Vane-Tempest, an analyst at Jefferies, on Monday slashed his price target on NMC’s stock in a research note called “Not Much Cash?” that flagged “concerns about accounting, cash flow, and governance”. Jefferies was the only investment bank with a “sell” recommendation on NMC’s stock prior to the Muddy Waters report.
Jefferies and Muddy Waters have both homed in on NMC’s use of supply-chain finance, a form of borrowing against supplier payments that accountants do not class as debt. Greensill Capital, a SoftBank-backed company that says it is “changing finance to change the world”, has arranged some of this funding for NMC.
The disarray at the company has been building in recent weeks. Earlier this month, the company’s founder BR Shetty and fellow shareholder Khalifa al-Muhairi quit the board after NMC admitted that a convoluted tangle of deals and share pledges between its largest investors left it unable to say who owns large chunks of its stock.
The filings on the credit card facilities also list one of NMC’s Emirati shareholders Saeed al-Qebaisi as a “grantor” in the deal. The company’s accounts have previously shown that the businessman personally guarantees some of NMC’s “short-term borrowings” — along with Mr Muhairi and Mr Shetty.
In December, the Financial Times reported that NMC had held talks to raise hundreds of millions of dollars of off-balance sheet debt to fund new hospitals. The company claimed the article was based on “false information”.
While NMC was not able to complete the €200m debt deal, draft documents seen by the FT show that Mr al-Qebaisi would also have been personally involved in the financing.
The Dubai companies register shows a special-purpose vehicle listed in these documents has its offices in the “Malek Saeed Butti Al Qubaisi Building”.
A spokesperson for Mr al-Qebaisi did not respond to a request for comment.
EU proposal would force Apple to make iPhones with user-removable batteries
A proposed EU law would force Apple to make iPhones with user-removable batteries – which is to say, batteries the user could quickly and easily swap out when the phone ran out of juice.
This would represent a return to the early days of smartphones, when owners would commonly carry a charged spare battery and simply snap off the back casing and swap the battery when it ran low …
The law would apply to all manufacturers selling smartphones within any of the European Union’s 27 countries.
Apple has already been resisting one EU proposal: for a standard connector to charge devices. That one would make Apple’s proprietary Lightning port illegal. Given the years it takes these things to pass, the likelihood is that one would be irrelevant.
Assuming the law is finally passed, and it does adopt USB-C as the standard, it won’t come into effect immediately. Manufacturers plan their new products sometimes years in advance, so they will need to be given an appropriate notice period before the law becomes binding. That period will be measured in years.
By which time, one of two things will have happened in Cupertino. Either Apple will already have adopted USB-C, just as it did with the iPad Pro, or it will have moved to the position we all expect it to reach eventually: a port-free iPhone which supports only wireless charging. Either way, a European charger standard will be completely irrelevant by the time it comes into effect.
However, a requirement to enable consumers to quickly and easily replace batteries would pose a bigger problem. It’s not just that the seamless design of iPhones is incompatible with a user-removable back, but also that an easily-removable cover would compromise the waterproofing offered by today’s iPhones. Additionally, it would involve substantial internal design compromises to enable the battery to be reached without disturbing other components. That would inevitably make smartphones thicker than they are now.
TechRadar notes that this is so far just an unconfirmed report.
It was leaked by Dutch publication Het Financieele Dagblad, claiming to have seen leaked documents of the impending suggested change […]
The rumor suggests that the new proposal will be unveiled in mid-March.
As with the charging standard, the proposal would take years to be implemented if it were approved, so this is not something Apple needs to worry about anytime soon. But given the potential impact on both the sleekness of devices and water- and dust-proofing, it’s likely that Apple won’t be the only smartphone manufacturer to object if it is indeed formally proposed.
What’s your view? Would you like to see iPhones with user-removable batteries, and be willing to accept the compromises this involves? Or is slimness, seamless design, and waterproofing more important? Please take our poll, and share your thoughts in the comments.
Gapping down
In reaction to disappointing earnings/guidance:
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Other news:
- LPI -6.3% (announces 2020 capital budget of $450 mln; updates three-year outlook) O -4.9% (prices offering of 9 mln shares of common stock at $77.40 per share)
- AMRN -3.5% (files mixed securities shelf offering), TAP -3.3% (report of multiple casualties at Molson Coors campus in Milwaukee)
- JPM -2.1% (files $50 bln debt securities shelf offering)
- OGS -1.2% (files mixed securities shelf offering)
Analyst comments:
- SPCE -13.9% (downgraded to Neutral from Outperform at Credit Suisse; also downgraded to Equal-Weight from Overweight at Morgan Stanley)
- RVLV -2.3% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- ALLK -2.1% (initiated with an Underweight at Barclays)
Gapping up
In reaction to strong earnings/guidance:
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M&A news:
- GCAP +65.7% (to be acquired by INTL FCStone Inc)
Other news:
- ETRN +6.6% (announces actions regarding EQT including acquisition)
- GILD +6.5% (to initiate two Phase 3 studies of remdesivir for COVID-19)
- ELOX +5.6% (appoints Dr. Gregory Williams as CEO; appoints Neil Belloff, Esq. as COO)
- NSIT +4.7% (authorizes the repurchase of up to $50 million of the Company's common stock)
- QGEN +4.2% (announces shipments of QIAstat-Dx test kits for SARS-CoV-2)
- LIVN +2.4% (announces research collaboration with Verily, an Alphabet (GOOG) company)
- ESPR +0.8% (confirms FDA Approval of the NEXLIZET)
- E +0.8% (announces Agogo 3 results that increase the size of the field to 1 billion barrels of oil in place and pave the way for its full field development with a third production hub)
- ALSN +0.6% (increases dividend)
Analyst comments:
- REGN +4.7% (initiated with an Overweight at Barclays)
- SQ +4.5% (upgraded to Buy from Hold at Canaccord Genuity)