Ex-Abraaj partner positions North Africa vehicle amid capital return

Ahmed Badreldin, the firm's former head of Middle East and North Africa, says the North Africa Fund II has roughly doubled LPs' capital on exited investments so far.

Investors in The Abraaj Group’s North Africa Fund II will breath a collective sigh of relief with a recent string of realisations from the portfolio.

The realisations follow a tumultuous year that led to Abraaj’s demise amid the alleged misuse of investor capital.

Riyada Managers BV, a Dutch-registered entity which manages the $375 million ANAF II, has exited roughly half of the portfolio thus far, generating around double LPs’ invested capital, according to a statement.

RMBV is the fund manager of Abraaj’s North Africa funds and had a contractual relationship with Abraaj Investment Management. It terminated the contract with Abraaj in June 2019 and has since managed the portfolio separately.

The average cash-on-cash returns are in line with the return targets promised to Abraaj’s investors or around a 2x return in US dollars on invested capital during its fundraising efforts from 2013 to 2015. The firm was targeting a 20 percent gross internal rate of return, a source with knowledge of the matter told Private Equity International.

LPs in ANAF II include German investment firm DEG, the European Investment Bank and Swiss Investment Fund for Emerging Markets, according to PEI data.

“We are selling because it makes sense at a certain value at a certain IRR and we have a good track record overall,” Ahmed Badreldin, former Abraaj partner and head of Middle East and North Africa, told PEI. “Some buyers try to be cute and under-price and take advantage of the Abraaj situation but we did not allow this. Ultimately the fund life has many years to go and we managed to achieve very good pricing for our investors.”

Capital from ANAF II was invested via equity and equity-related investments in small and medium-sized companies operating primarily in Morocco, Tunisia, Egypt and Algeria.

RMBV made seven full or partial exits from the portfolio since the beginning of 2018. According to the statement, full exits include: Tunisian lead acid battery manufacturer Assad L’accumulateur Tunisien; supermarket chain Magasins Aziza; Middlesex University Dubai; Moroccan diagnostic company Oncologie et Diagnostic du Maroc; and Egyptian K-12 education group Cairo for Investment and Real Estate. The firm also partially exited Egypt’s Cleopatra Hospitals Group and Nahda University in Beni Suef.

Realisations occurred through a variety of exit routes, including local market initial public offerings, share buybacks and trade sales. RMBV expects to make another full exit by year-end, it is understood.

Abraaj’s collapse last year, which culminated in its senior executives facing legal charges in the US, provisional liquidation and its regional fund platforms being sold off to global buyers, has shone a light on the topic of governance in private equity.

Along with the exits, RMBV focused on improving governance structures in its portfolio companies, including hiring third-party portfolio company valuation providers, installing independent boards and having better disclosure practices, Badreldin said.

He noted that the key challenge after the Abraaj fallout was to keep the team focused on the fund.

“Ultimately the team stuck together through these last few years and focused on supporting the fund and our investors. It was a challenge to secure the juniors but everybody focused on the mission rather than the noise around them.”

RMBV has had one departure – a mid-level executive – out of nine staff since 2018.

To manage costs, RMBV does not maintain an office and its team are based out of Egypt, Tunisia and Algeria. Badreldin himself is based in Dubai. The asset management functions, third-party valuation support and external fund administration are all outsourced, he said.

On the firm’s fundraising plans, Badreldin noted the team is focused on “maximising returns for its LPs” and could look to raise a vehicle in the future.