United Arab Emirates

Saudi shares rose at the open on Thursday, while Dubai-listed Air Arabia tumbled after the carrier revealed it had an exposure of $336 million to embattled Dubai private equity firm Abraaj, Reuters reported. The Tadawul All-Share Index was up 0.3 percent, led by financial shares, after the kingdom’s bourse was granted inclusion by MSCI into the index provider’s emerging markets benchmark. Al Rajhi Bank and the country’s largest lender National Commercial Bank were both up one percent.

Dubai-based Abraaj Group agreed to sell its Latin America, Sub Saharan Africa, North Africa and Turkey Funds management business to U.S. investment management firm Colony Capital Inc, the companies said on Thursday. The agreement comes after months of turmoil at Abraaj in the wake of its dispute with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp (IFC), over the use of their money in a $1 billion healthcare fund, the International New York Times reported on a Reuters story. The group has denied it misused the funds.

Abraaj said a Cayman Court appointed provisional liquidators, allowing the troubled private equity group to launch a court-supervised restructuring plan, the Financial Times reported. The Dubai-based firm in a statement on Tuesday said a court order on Monday appointed executives from PwC as joint provisional liquidators of Abraaj Holdings and executives from Deloitte for the same role at the asset management arm, Abraaj Investment Management Limited, or Aiml.

In a related story, Reuters reported that an Abu Dhabi Financial Group company has made a conditional $50 million offer to buy private equity firm Abraaj’s investment management business, a document reviewed by Reuters shows. Abu Dhabi Capital Management’s (ADCM) bid is well below the $125 million offered by New York-based Cerberus Capital Management before Dubai-based Abraaj filed for provisional liquidation in the Cayman Islands last week, Reuters reported. It was unclear whether the terms of the offer that Cerberus made were different from the one made by ADCM.

Dubai-listed Air Arabia said on Monday it has an investment in Abraaj funds, without elaborating further on its exposure to the private equity group which last week filed an application for provisional liquidation, Reuters reported. Abraaj’s founder Arif Naqvi is a board director of the Middle East low-cost carrier, according to Air Arabia’s website.

In a related story, Reuters reported that a family involved with Abraaj handed over debt exposure to the private equity firm to a little-known fund that has now filed a petition against Abraaj, deepening its financial woes, sources said. An adviser to the Jafar family said the family was not party to the legal proceedings started by Auctus Fund in the Cayman Islands against Abraaj, although Hamid Jafar had provided Abraaj with a private loan which has since been transferred to Auctus. Dubai-based Abraaj has declined to comment on the petition.

Abraaj, the Middle East’s biggest private equity firm, has filed a petition in the Cayman Islands, asking the court to appoint PwC as provisional liquidators for the embattled company, Reuters reported. “The appointment of provisional liquidators imposes a moratorium on the enforcement of all unsecured claims against the company, allowing time for a proposal to be put to creditors for the orderly restructuring of the company,” it said in a statement.

A creditor of Dubai-based Abraaj has started legal proceedings in the Cayman Islands seeking the restructuring of the private equity firm’s liabilities, Reuters reported. Auctus is the second creditor, after Kuwait’s Public Institution for Social Security (PIFSS), to start legal action in the Cayman Islands, where Abraaj Holdings is registered. In a statement to Reuters from its representatives, legal firm Kobre & Kim, Auctus Fund Ltd. said it has filed an application that seeks the appointment of “court-approved professionals in the Cayman Islands” to manage the restructuring process.

A large creditor of Abraaj Group wants a Cayman Islands court to oversee the debt restructuring of the private-equity firm, adding more legal pressure on a once-rising star of the Middle East investment world, The Wall Street Journal reported. In documents filed Friday in the Cayman Islands court system, private-debt specialist Auctus Fund Ltd. said Abraaj’s holding company and its private-equity unit owes it about $300 million.

Abraaj dipped into investor funds because of cash shortages at the group, but there is no evidence of embezzlement, a forensic review of two funds at the struggling private equity firm by Deloitte has found, the Financial Times reported. The emerging-markets specialist suffered from a “lack of adequate governance, including segregation of duties, and the overall weakness in the control framework,” according to briefing notes prepared last week for creditors and seen by the Financial Times.