Alvarez & Marsal, the current administrator of recovering Abu Dhabi-based healthcare chain NMC Health have initiated preliminary steps towards legal action against the firm’s auditor, Ernst & Young as part of its ongoing efforts to make the maximum recovery.
One of the largest healthcare chains in the UAE, the B R Shetty-led NMC Heath went on a downward spiral when US-based activist investor Muddy Waters reported the firm had inflated its cash balances and understated its debts.
The firm was subsequently put on administration under US-based consulting firm Alvarez & Marsal in April.
Earlier, the current administrators set out a three-year turnaround plan that involved bringing their UAE operations into administration through the Abu Dhabi Global Markets Courts to fend off creditor claims and collect additional funds from lenders to enable the continuation of their UAE and Oman operations.
In its half-year progress report to the UK authorities, the administrator responded that it was assessing whether actions could be taken against individuals and/or third parties to increase recoveries.
“We have interviewed and selected leading counsel to advise us in relation to potential actions and have initiated the legal process of making a claim against the company’s auditor, Ernst & Young LLP, by issuing a preliminary notice of potential claim,” Alvarez & Marsal said.
UK-based EY had audited NMC Health since its listing in London in 2012 until it went to administration. The value of the legal action is expected to be equal to the total sum of undisclosed debt found on NMC’s records, which could be more than $4 billion.
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