NMC Health discovers almost $3bn of debt hidden from its board
Middle Eastern-focused healthcare group said debt used for unknown purposes
NMC Health has discovered almost $3bn of debt hidden from its board that has been used for unknown purposes in the latest disastrous revelation at the former FTSE 100 stalwart struggling to find answers in a mounting accounting scandal.
The Middle Eastern-focused healthcare group said it had identified more than $2.7bn in debt facilities that had previously not been disclosed or approved by the board — more than twice as much as the $2.1bn of reported group debt.
The company said it was working with its advisers “to understand the exact nature and quantum of the undisclosed facilities” but believed that some proceeds may have been utilised for non-group purposes.
The discovery of the unreported debt facilities will add to the questions being asked of the company’s former management — most of which have been cleared out from its board — and its founder and previous majority owners.
The UK’s financial watchdog has already started a formal investigation into the company’s finances after it was forced to reveal unauthorised off balance sheet loans last month. The company’s shares have been suspended and its chief executive fired amid an internal investigation into its finances led by former FBI director Louis Freeh.
NMC has brought in Moelis and PwC to lead discussions over debt restructuring with its lenders as well as to help provide transparency over its financial position. The board of NMC said it had received an update on Tuesday that the group’s debt position “was materially above the last reported number” at an estimated $5bn. “The work on verifying this figure is ongoing,” it said.
Staff at NMC said they did not get paid last month, raising worries over the cash position of the group. NMC said on Tuesday that it was focused on “safeguarding its operational liquidity to continue funding existing operations throughout its various subsidiaries”. NMC said that it recently completed the payment of its February payroll.
In a statement, the company said: “At a time of increasing sensitivity towards the provision of public healthcare, NMC has reported a strong operating start to the year and has provided services in the months of January and February to over 900,000 outpatients, 24,000 inpatients and 1,700 maternity deliveries in the UAE.”
The company said at the end of last month that an interim report had found potential discrepancies and inconsistencies in its cash position, and a supply chain financing arrangement apparently used by its founder as well as a major shareholder guaranteed by NMC but not approved by the board.
While NMC’s shares are suspended, its publicly traded debt fell sharply on the news, suggesting that the group’s lenders are braced for heavy losses. The company’s $360m convertible bond fell to just 20 cents on the dollar, according to traders, having previously been quoted at 40 cents.