Limited partners of Abraaj Group have been urged by liquidators to cover payments related to a defaulted subscription credit line, and may be on the hook for another, according to a report prepared by joint provisional liquidator Deloitte.
A number of entities in Abraaj limited partnerships defaulted on a capital call facility held with British bank Barclays, at some point before the JPLs were brought in. The defaulted proportion of this facility will be paid off using management fees raised from a drawdown notice recently issued by the JPLs to LPs in Abraaj’s LatAm, Turkey, Pakistan and Africa funds.
The drawdown includes $11.5 million to cover management fees from 1 July 2018 to 31 December 2018 and an additional sum to cover capital requirements from existing projects. The total amount of capital called is $36 million.
“With the exception of two small investors in Abraaj Turkey Fund I, the defaulting investors are all Abraaj related entities,” the report noted.
In July receivers appointed by Société Générale also issued a drawdown notice to LPs in Abraaj’s $6 billion APEF VI fund after they failed to make payment on a loan due by 25 June. As of mid-August LPs were disputing the validity and enforceability of this notice.
Until a sale of Abraaj’s fund management business is concluded, LPs are required to bear their proportion of “all costs, fees, expenses and liabilities, together with any tax thereon” stipulated in their limited partnership agreements.
“The JPLs have continued to stress to the LPs that the Company is deeply insolvent and lacks the liquidity to be able to meet its funding needs,” the document noted.
The JPLs have put in place arrangements to ensure that all amounts drawn down from LPs are held in bank accounts of the relevant funds, “legally segregated from the assets of the company”.
A spokewoman for Deloitte declined to comment.
At least $660 million of investor money was allegedly transferred into Abraaj’s ‘treasury’, as forensic accountants dubbed it, and more than $200 million was allegedly transferred to the account of founder Arif Naqvi and people close to him, according to a report published on Tuesday by the Wall Street Journal.
In a statement issued on Wednesday in response, Naqvi said:
“In respect of any allegations about my use of Abraaj funds, I confirm that I have neither misused nor misappropriated any Abraaj funds. There was nothing untoward about my requests for transfers of Abraaj Group funds to me or my family, or for my personal investments or obligations. In drawing down funds from Abraaj, I acted in accordance with the arrangements put in place by the Abraaj Group.”
Deloitte and PwC were appointed as JPLs in June to restructure Abraaj Holdings and the fund management business and sell their assets. Reports first emerged in February that LPs in Abraaj’s $1 billion global healthcare fund had hired an auditor to trace money.
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