US hedge fund Davidson Kempner Capital Management bought $1.1 billion in bad debt from Abu Dhabi Commercial Bank PJSC as the lender cleans up a balance sheet battered by a series of corporate defaults.
(Bloomberg) —
US hedge fund Davidson Kempner Capital Management bought $1.1 billion in bad debt from Abu Dhabi Commercial Bank PJSC as the lender cleans up a balance sheet battered by a series of corporate defaults.
The portfolio consists of 44 corporate loans to United Arab Emirates-based small- and medium-size enterprises, according to a statement. Davidson Kempner didn’t disclose the price at which it bought the non-performing debt.
ADCB, the third-largest lender in the UAE, was impacted by corporate collapses such as that of hospital group NMC Health Plc, payments firm Finablr Plc and construction company Arabtec Holding. Since lending to these firms, the bank has been tied up in restructuring talks and has been forced to write down the value of many of the loans.
The sale “is a necessary step to improve the lender’s asset-quality metrics” as the loans had clouded ADCB’s prospects since 2019, Edmond Christou, senior Bloomberg Intelligence analyst, wrote in a note. “If the transaction price is higher than the provisions management allocated for these loans, then the bottom line may get a boost.”
Davidson Kempner, which has about $36 billion in assets under management, hired Seapoint Capital Ltd. as the special servicer and Reviva Capital as loan servicer for the transaction.
- Read more: Abu Dhabi’s Second-Largest Bank Plans $1 Billion Bad Debt Sale
ADCB shares gained 5.5% last year compared with a 20% jump for the benchmark Abu Dhabi stock index. The shares were suspended from trading on Tuesday ahead of its 2022 financial results.
(Updates with comments from BI analyst in fourth paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
