B R Shetty’s NMC depends on $250mn debt for survival

According to analysts, B R Shetty’s struggling NMC Health’s survival prospects could depend on the company raising around $250 million in debt as it reportedly prepares for insolvency proceedings.

Vijay Valecha, Century Financial’s chief investment officer, said the sum could come from debtor-in-possession funding, which is applicable to businesses that have applied in the US for bankruptcy protection.

Debtor-in-possession financing or DIP financing is a special form of financing provided for companies in financial distress, typically during restructuring under corporate bankruptcy law.

“It enables the firm to continue or sustain its operations while it navigates from the bankruptcy process,” Mr. Valecha said.

According to sources, NMC is trying to collect a debt of up to $250 million and has selected Perella Weinberg Partners to advise on the process.

In April this year, the former London-listed NMC holding company was forced into administration following allegations of fraud, mismanagement and the discovery of $4.1billion worth of undisclosed loans.

Administrators Alvarez and Marsal said they have been trawling through hundreds of thousands of documents last month and scheduling interviews with directors to try to figure out what creditors might expect.

Mr. Valecha said those lenders with large exposure to the hospital’s operator were likely to finance the debt.

“It would help sustain NMC’s business operations, which in turn would improve the banks’ chances of recovering part of its outstanding debt,” he said.

“If NMC does succeed in securing debtor-in-possession financing, it lets vendors, suppliers, creditors and customers know that it will be able to remain in business, provide services, and make payments for goods and services during its reorganization.

“If the lender has found that the company is worthy of credit after examining its finances, it stands to reason that the marketplace will come to the same conclusion.”