NMC Health looks certain to be removed from the FTSE 100 Index at the rebalance next month/Bloombergby Bloomberg
NMC Health fired its Chief Executive Officer as it revealed financial discrepancies that have worsened the crisis for the Middle Eastern hospital chain targeted by short-seller Muddy Waters Capital.
Founder Bavaguthu Raghuram Shetty and former Vice Chairman Khaleefa Bin Butti controlled entities used for NMC’s supply chain financing.
NMC Health stated that the board was not aware of these financial arrangements which had been in place since early 2018. BR Shetty was forced off the board earlier in February 2020 amid concerns he had misrepresented his shareholdings.
NMC’s shares were halted in London last week as the hospital operator sought to provide clarity to the market as to its financial position.
Furthermore, the company delayed reporting its 2019 results, planned for March 2020, until at least the end of April. NMC looks certain to be removed from the FTSE 100 Index at the rebalance next month.
The operator of the largest medical network in the UAE announced a management overhaul along with the latest revelations. Prasanth Manghat, the CEO of NMC Health was dismissed and Chief Financial Officer Prashanth Shenoy was granted extended sick leave.
Manghat will be succeeded on an interim basis by Michael Davis, currently the Chief Operating Officer with immediate effect.
An unnamed member of the treasury team was suspended because of a belief that the independent review has been obstructed and the company is looking at whether others are involved.
Carson Block, the founder of Muddy Waters, said, “At this point, the company’s announcements speak for themselves and seem to be even more damning than our initial report was.”
The company’s troubles began in December 2019 when a Muddy Waters report alleged that NMC Health appeared to have overpaid for redeveloping an Abu Dhabi hospital and for a stake in Premier Care Home Medical and Health Care.
The short seller said NMC’s margins appeared high in comparison with rivals and its cash balances were high in relation to the amount of interest the company reported earnings.
The firm commissioned an independent review in January 2020 led by former FBI Director Louis Freeh. Interim findings given to the board revealed more financial liabilities that had not been disclosed, including the supply chain financing agreements.
The value of the drawdown on the facilities was $335 million as of the end of 2019, and the company said it’s trying to determine the current value.