Abraaj denies misuse of LP funds (free content)

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Abraaj has refuted allegations that the investor has misused LP funds committed to one of its largest vehicles. The investor has stated that these claims are inaccurate and misleading. The GP has since returned some of the capital to LPs.

The accusations centre around Abraaj Growth Markets Health Fund (AGHF) closed at $1 billion in 2016.

Abraaj has appointed KMPG to audit the fund. KPMG has now completed its review and reported that all payments and receipts have been verified,  Abraaj  says.

The LPs’ cracks in confidence allegedly came to a head at a meeting in London in September last year that some capital in AGHF had been put to non-fund use, according to media reports.

Khawar Mann, partner at Abraaj is chief operating officer of the fund. Arif Naqvi [pictured] is founder and chief executive officer at Abraaj.

Ramblings are reportedly around $200 million worth of funds that remained un-invested as of 2017. Reported allegations are that the funds may have been misappropriated.

Abraaj has responded by saying that some capital was not used as quickly as anticipated due to unforeseen political and regulatory developments in a number of the regions that the vehicle was targeting.

The GP claims that all capital that was drawn from AGHF LPs was used for approved fund investments.

Media reports single out the World Bank, through the International Finance Corporation (IFC) and the Bill and Melinda Gates Foundation as some of the LPs that expressed discontent on the state of affairs in the way the capital had been used.

LPs had requested that unspent capital in the fund be returned to them within 60 days of the September meeting, according to reports.

Abraaj returned some capital to the LPs in December 2017.  The amount returned was in excess of $100 million, reports state.

However, not all of the 24 LPs in the funds were complaining, according to media reports.

The LPs had allegedly also requested an independent auditor be appointed to investigate the use of funds. Abraaj has hired KPMG to verify all receipts and payments transacted through the fund.

A World Bank unit that investigates corruption had allegedly looked into the matter, and found no evidence of wrong doing according to The New York Times.

Some LPs in the fund

The Gates Foundation has a $100 million commitment to the fund, according to reports.

The IFC had committed $150 million worth of equity to the fund in 2015, about 50% more than the $100 million that it had initially set out to invest. The IFC commitment is set to be channelled through a feeder fund, the Abraaj IFC Global Growth Markets Strategic Fund.

Overseas Private Investment Corporation has a $150 million debt commitment to the vehicle.

Proparco had €9.2 million in the fund, committed in 2016.

CDC had committed $75 million to the fund in 2016.

The African Development Bank (AfDB) committed $25 million the same year, to the fund.

The Abraaj healthcare fund was set up to target a gross internal rate of return (IRR) of over 15%.

Domiciled in the Cayman Islands, AGHF has a 14-year life span, with a six-year investment period from the first close.

AGHF has a 2% management fee on total commitments during the investment period, which drops to 1.5% on total invested capital until year-10. This will further reduce to 0.75% until the end of the fund’s life.

The vehicle has a 20% carry, with an additional 5% based on achieving social impact objectives. Hurdle was been set at 6%.

The fund was structured to target companies across Africa and South Asia, with opportunistic investments in Latin America and South East Asia.

AGHF invests growth capital, with a focus on buy-and-build strategies. The investor is targeting opportunities across the healthcare services value chain, including early-stage deals.

Sub-sectors include medical technology, education, and distribution and logistics services.

Healthcare investments

AGHF has invested about 50% of the $1 billion raised from LPs, media reports say.

Abraaj says that the invested capital has been channelled to 24 hospitals, 30 diagnostic centres and 17 clinics, across the emerging market countries that it invests.

Abraaj has not disclosed which deals have been closed from the fund.

In Africa, Abraaj has been working on plans to back a South Africa-based healthcare services provider.

The investor has been working on plans to back a Kenya-based healthcare services provider that manages a group of hospitals.

Abraaj’s healthcare portfolio in Africa includes the North Africa Hospital Holdings Group (NAHHG), a $200 million healthcare investment platform. This investment was made from its North Africa dedicated fund.

Cleopatra Hospital and Cairo Medical Centre in Egypt, and Polyclinique Taoufik, in Tunisia – all backed in 2014, were moved to the NAHHG platform.

The NAHHG platform renamed to Cleopatra Hospital Group in 2015, and holds four hospitals in Egypt, with a total bed capacity of 624 beds.

The platform listed on the Egyptian Exchange (EGX) in 2016.

Also in North Africa, Abraaj backed Centre de Traitement Al Kindy and Clinique Spécialisée Menara, two healthcare services companies in Morocco, in 2015.

The investor folded the two companies into a holding company, Oncology and Imaging Diagnostics, to create a network of diagnostics and treatment centres across the country.




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