Abraaj was the best-known emerging-markets buy-out firm. But it suffered year after year of multi-million-dollar operating losses
warning”, it accused the Abraaj Group, a buy-out firm based in Dubai, of inflating the value of its investments to lure capital into its latest fund. The email was anonymous and littered with typos and grammatical errors, but its tone was sinister. “The governance is not what it appears but employees are afraid to speak,” it said. Hamilton Lane forwarded it to Abraaj, requesting documents disproving the claims.
In a complaint filed last month against Abraaj and Mr Naqvi, the Securities and Exchange Commission , America’s main financial regulator, alleged that between late 2016 and mid-2018 the firm diverted over $230m it said was for acquisitions from the health fund to its bank account. When several investments failed to materialise, clients started asking questions.
Liquidators are searching for new managers for Abraaj’s funds—a tedious task. Such deals must be approved by a pre-agreed share of the limited partners, as investors in buy-out funds are called—and Abraaj has over 500. “It’s like herding cats,” says an adviser to the process. But there is progress. On May 9th, an American buy-out firm, said it would become the health fund’s custodian. Last month Colony Capital, based in California, bought Abraaj’s Latin American business.
But the appearance of closure is misleading. Abraaj still owes over $1.2bn to creditors; a source familiar with its books doubts that “anything close” to that will be repaid. A letter by lawyers for investors in its $1.6bn Fund, alleges that $300m “at the very least” from that vehicle went towards “wrongful transactions” and is still missing. For funds raised before 2013 Abraaj had no external administrator, notes a former partner.
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