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13 Feb 2020
London, 13 February 2020 -- Moody's Investors Service, ("Moody's") has
today downgraded NMC Health plc's (NMC) corporate family rating
(CFR) to Ba2 from Ba1 and the company's probability of default rating
(PDR) to Ba2-PD from Ba1-PD. Concurrently Moody's
has downgraded the rating of the $400 million USD-denominated
trust certificates (or sukuk) of NMC Healthcare Sukuk Limited due 2023
to Ba2 from Ba1 and placed all ratings under review for downgrade.
The downgrade to Ba2 is mainly driven by governance considerations and
reflects Moody's view that the recent suspension of two members
(Dr. Shetty and Mr. Khalifa Butti Omair Yousif Ahmed Al
Muhairi) of the board of directors reflects weaknesses in corporate governance.
Dr. Shetty, the founder of NMC, and Mr. Khalifa
Butti have played an important role in the success of NMC and its expansion
to over $2 billion in revenue in 2019. Their suspension
creates uncertainty around the strategic direction of the company where
concerns have also developed over whether effective controls over the
operations including the integration of acquired businesses have been
adequately overseen and enforced. Moreover, recent events
have reduced Moody's confidence that the company will be able to
prioritize an appropriate focus on reducing leverage, also raising
concerns over the broader impact on its ability to access capital,
at least in the short term. As of LTM June 2019, NCM's
Debt to EBITDA was 4.7x which is high compared to the guidance
for the Ba1 rating of 3.5x.
Furthermore, the review for downgrade reflects uncertainty surrounding
the actual ownership of the company which could trigger a change of control
and lead to a debt acceleration based on the definitions in the company's
syndicated loan facility agreement.
On February 10th 2020, Dr. B. R. Shetty,
a major shareholder and a board member in NMC, informed the company
that he is conducting a legal review in order to verify his shareholding
in the company. Dr. B. R. Shetty, alongside,
Mr. Khalifa Butti Omair Yousif Ahmed Al Muhairi have both been
suspended from the board of directors. If the legal review determines
that the combined ownership of NMC by the KBBO group (which aggregates
the holdings of the Butti family) and Dr. Shetty is below a certain
threshold, this would trigger a change of control clause under the
company's syndicated loan facility agreement which also includes
NMC's $400 million revolving credit facility, which
matures in February 2021. Prior to this announcement, the
KBBO group and Dr. Shetty reported a combined ownership of 42.7%
down from 58.7% following the unwinding of a series of margin
loans. A change of control clause would only be triggered if any
party, excluding the KBBO group (which aggregates the holdings of
the Butti family) and Dr. Shetty, were to hold more than
50% of the company's shares or if the KBBO group and Dr.
Shetty were to hold less than a certain threshold under the syndicated
During the review period, Moody's will assess (1) if a change
of control clause has been triggered and the possible mitigation if the
debt is accelerated, (2) the strategic direction of the company
especially if the composition of the board changes and (3) the progress
on deleveraging from the current high levels.
Recent events have highlighted areas of weakness in NMC's governance
related to oversight, financial management and operational controls
and this is the main driver of today's rating action. This
view is underpinned by the suspension of two of the company's most
prominent board members and the potential that directors of NMC have incorrectly
reported their holdings in the company, resulting in concerns over
the impact on the proper functioning of the board at a time when other
governance concerns have been raised.
From a social point of view, NMC plays a crucial role in the provision
of health care in the emirate of Abu Dhabi in light of limited alternatives
to private hospitals and the scale of its operations. The significant
societal importance of healthcare means that the sector tends to be sensitive
to demographic and societal pressures, especially when it comes
to access and affordability.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
Headquartered in Abu Dhabi, NMC Health plc (NMC) is the largest
healthcare provider in the UAE. The company owns and manages over
190 facilities, and offers a broad range of medical and surgical
healthcare services, including its world-class in-vitro
fertilization facilities. In addition, NMC has a distribution
business, which contributed to 24% of revenue for the twelve
months ending June 2019, where the company has exclusive distribution
rights for a number of pharmaceutical, medical, scientific
equipment and other products in the UAE.
NMC is listed on the London Stock Exchange premium market (FTSE 100 company),
with a current market capitalization of $1.9 billion as
of 13 February 2020.
The local market analyst for this rating is Julien Haddad, +971
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
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regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
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case where the transaction structure and terms have not changed prior
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affected the rating. For further information please see the ratings
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For any affected securities or rated entities receiving direct credit
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the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
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the lead rating analyst and to the Moody's legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
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No Related Data.
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