NMC Health hires Moelis to advise on debt restructuring
Healthcare group is facing a cash crunch and is operating without a full finance department
NMC Health has hired Moelis to advise on debt restructuring as the struggling healthcare group faces signs of a cash crunch with staff members complaining about late salary payments.
The mandate was welcomed by lenders, who have become increasingly concerned about their loan exposure to the scandal-hit FTSE 100 company. Trading of NMC’s shares was suspended last week as the UK’s Financial Conduct Authority launched an investigation into its finances.
“We just desperately need to see some stabilisation,” said one banker.
Moelis declined to comment on the appointment, which was first reported by Reuters.
While NMC reported £500m of cash on its balance sheet as recently as June, the true state of its finances is unclear after the company announced last week it had found discrepancies in its bank statements. The Abu Dhabi-based group is also operating without a full finance department, after suspending a member of its treasury team and granting “extended sick leave” to its chief financial officer.
Some staff at NMC facilities on Sunday complained that they had yet to receive their February salaries.
“We are all very worried,” said one administrator. “They don’t give us any information.”
One manager said salaries would be paid on Sunday, blaming the delay of several days on recent management changes. “We will have to look elsewhere for work quickly if the money doesn’t come through,” said another employee.
Late salary payments have heightened concerns among the group’s lenders that the company could collapse without external assistance.
“They are running out of cash,” said one person briefed by NMC management on the state of its finances. He said that the delayed salaries were affecting staff at facilities across the United Arab Emirates.
Two people briefed on the matter said NMC’s interim management and some shareholders have been in talks with officials in Abu Dhabi over the weekend seeking a financial solution to save the firm, which faces questions over its true debt position.
The Financial Times reported last week that the group recently resorted to pledging future credit card payments from customers to secure funding, a form of receivables financing arrangement more commonly used by small businesses or those that are short of cash.
NMC did not respond to requests for comment.
Rating agency Moody’s said last week that uncertainty surrounding NMC’s share ownership “could trigger a change of control and lead to a debt acceleration” on its main loan facility — meaning that banks could demand full repayment immediately.
Some lenders are also concerned that there is more debt secured against assets and cash flow than they initially realised. “The lenders have been blindsided here, and are scrambling to catch up,” said one UK-based banker.
One investor said that NMC is now at risk of losing access to working capital loans from some UAE banks, which could make it even harder for the company to pay staff and suppliers.
The rapid decline in NMC’s fortunes, sparked by a steady stream of revelations about confused shareholdings and unreported debts, has prompted calls among bankers and investors for the government to intervene to protect the UAE’s largest private healthcare provider.
NMC is an integral part of the Gulf federation’s healthcare system. The situation is particularly acute given the unfurling coronavirus crisis, which has hit the UAE, a popular tourist destination.
A cycling race was cancelled last week after two staff members of a team participating in the tour tested positive, leading to top professional athletes — including four-time Tour de France winner Chris Froome — being placed under quarantine in their hotel in Abu Dhabi. Teams started to head home on Sunday after being tested.