Leading UAE law firm Hadef & Partners has successfully advised the KBBO Group in relation to a first of its kind restructuring in the Abu Dhabi courts.
The Background
KBBO Group and several of its related parties and companies instructed Hadef & Partners in 2020 to represent the Group before the Financial Restructuring Committee (FRC) in an effort to reach a consensual restructuring with creditors.
KBBO Group was a successful conglomerate of companies in various industries in the UAE. Following the sudden decrease in the value of shares of NMC Health PLC and the decline in revenues of companies and businesses from the COVID 19 pandemic and related factors, the financial resources of the Group were significantly impacted causing significant cash-flow issues.
The Restructuring
In June 2021, Hadef & Partners filed an application for Restructuring in Bankruptcy under Section 4 of the UAE Bankruptcy Law (Federal Law No. 9 of 2016, as amended) for the Group and its related parties. The proceedings eventually included a total of 30 related debtors.
Dr Faraj Ahnish said:
“The UAE's Bankruptcy Law is a testament to the UAE’s commitment to providing a conducive environment for business and investment. The business community is fortunate to have the continued support of the Abu Dhabi Judicial Department. I was confident in our application and the ability of the Abu Dhabi Courts to address a complex financial restructuring case such as this.”
The Abu Dhabi Court commenced restructuring proceedings on 27 July 2021 pursuant to Article 78(3) of the UAE Bankruptcy Law. Thereafter, the Court accepted the appointment of Mr. Salem Ballama, followed by Mr. Paul Leggett and Mr. David Stark of Deloitte, as Trustees. The Commencement Decision imposed a stay of all judicial and execution proceedings. The application was the first of its kind with more than 30 applicants under one restructuring process.
The Debtor and all the Joined Litigants were represented by Hadef & Partners at all stages of the proceedings and throughout the claim adjudication process. The claims submitted and published by the Trustees as at 9 November 2021 exceeded AED 30.1 billion. In April 2023, the Abu Dhabi Court issued a decision confirming that the total final value of approved creditor claims was approximately AED 7 billion.
Mohammed Hadef Al Dhaheri said:
“The synergy between the legal framework established pursuant to the UAE Bankruptcy Law, coupled with a responsive judicial system, played a pivotal role in the successful outcome. The Abu Dhabi Court addressed applications submitted by Creditors, Trustees and the Debtors swiftly upon their submission. From the date of commencement in July 2021, to the date of the ratification of the Plans, the Court has been receptive to working with the Trustees, in interpreting the Law and providing the flexibility required to preserve the rights of the Debtors and support such an important restructuring."
The Successful Outcome
Following months of complex negotiations with tens of creditors, with the oversight of the court appointed Trustees, Hadef & Partners (on behalf of all the Debtors) was able to successfully reach an agreed and comprehensive restructuring plan for the Group and the related Applicants. In August 2023, Hadef & Partners represented all the Debtors in several sets of creditor meetings held by the Trustees to record the votes on the various plans. At these meetings it was confirmed that 8 separate restructuring plans had been approved.
On 14 September 2023, the Abu Dhabi Court of First Instance issued a decision ratifying the 8 restructuring plans (1 Main Plain and 7 Sub-Restructuring Plans) (the decision was amended on 18 September 2023). The Trustees published a summary of the ratified plans on 22 September 2023.
Following the Ratification Decision, on 26 September 2023, the Abu Dhabi Execution Court granted an application to cancel and lift all attachments imposed against one of the debtors for an amount exceeding AED 1 billion further to an application submitted by Hadef & Partners accompanying the Ratification Decision and the Main Restructuring Plan. The Abu Dhabi Execution Court’s decision evidences the receptiveness to the Ratification Decision and the unambiguous terms of the Restructuring Plan without need to consider any further submissions from opposing parties.
Ghalib Mahmoud said:
“The UAE continues to be a dynamic jurisdiction in many aspects and the approval by local and international creditors and the local courts of the KBBO Restructuring is only one example. While it is common in the United States for distressed entities to file for Chapter 11 Bankruptcy, the KBBO Restructuring Plan has paved the way for distressed businesses to seek the guidance of the UAE Courts and restructuring frameworks envisaged under the UAE Bankruptcy Law for the restructuring of debts. The UAE Bankruptcy Law empowers the debtor and specifically requires the “debtor’s assistance” in reaching an agreed plan. Our role in having key bilingual counsel and local advocacy presence for the 3 year duration of proceedings and party negotiations contributed greatly to a successful outcome. It was not a simple task to negotiate, in the best interests of our clients, with a range of international and local financial institutions (and their legal representatives), all while simultaneously considering the UAE law implications and practicalities and preventing parallel efforts to unravel the process at various junctures. The Ratification Decision is a culmination of years of dedicated effort and enables the KBBO Group to move on, while supporting implementation of the Plan.”