UAE - Sean Cleary, chairman of Abraaj Holdings, has resigned as the Dubai-based private equity group undergoes a court-supervised restructuring.

"Following the appointment of the joint provisional liquidators, Sean determined that his role as an independent non-executive director would serve no further legal or fiduciary purpose in the interests of creditors or other stakeholders," Abraaj said in a statement. "Sean is fully supportive of the appointment of the joint provisional liquidators and the effective restructuring process."

The resignation of Cleary was announced as Abraaj founder Arif Naqvi and a fellow executive Muhammad Rafique Lakhani faced court proceedings in Sharjah for issuing bad cheques.

Last week, the Grand Court of the Cayman Islands appointed provisional liquidators for the holdings and investment management units of Abraaj, beset by debts, allegations and litigations. The move came after some investors commissioned an audit to investigate an alleged mismanagement of funds.

Abraaj has told investors and creditors it needs to sell four funds to Colony Capital by July 1 to survive. Last week, Colony Capital agreed to buy some of Abraaj's funds. However, the Cayman Islands court will decide on July 11 whether to approve Colony Capital's deal to take control of those Abraaj funds.

The Colony deal was billed by Abraaj as a rescue plan, but some investors and creditors have told the firm that it is moving too quickly. Parties that voiced concerns include the World Bank, which has invested in a $1 billion Abraaj health-care fund, Kuwait's pension fund and Auctus Fund Ltd., which owns $300 million in loans made to Abraaj, they said.

Abraaj has been thrown into turmoil by a dispute with four investors, including the Bill & Melinda Gates Foundation and International Finance Corp, over the use of their money in a $1 billion healthcare fund.

Meanwhile, Abraaj Group's liquidator is reportedly seeking ways to make payments owed to staff at the buyout firm, while it has raised funds to cover immediate payroll costs amid the company's restructuring.

Employees are concerned they won't get a lump-sum payment due to workers under the UAE law instead of a pension, according to people familiar with the matter.

Reportedly, about 90 employees such as back-office staff, secretaries and receptionists are owed money after working for the buyout firm, they said. The amount owed may total as much as $20 million.

Abraaj, which had grown phenomenally in 15 years into an emerging market champion with assets of $13.6 billion at its peak, has been plagued by worsening liquidity crisis that had triggered defaults, pushing it to seek the court protection against creditors after a Kuwaiti pension fund sought a petition to wind up Abraaj for non-payment of a $100 million debt.

Earlier this month, Abraaj met its creditors to reach a standstill deal, which the firm said was backed by the vast majority of its lenders, to facilitate the sale of its investment management business to Cerberus. However the Kuwaiti fund refused to join secured creditors in the proposed debt freeze agreement.

 

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