UAE banks face write-downs of between 25%-50% on NMC debt, sources say

By Saeed Azhar, Davide Barbuscia and Hadeel Al Sayegh

DUBAI (Reuters) - Banks in the United Arab Emirates (UAE) with exposure to troubled hospital operator NMC Health <NMC.L> risk having to make provisions for between 25% to 50% on more than $2 billion of outstanding debt to the company, three banking sources said.

NMC, the largest private healthcare provider in the UAE, was placed into administration earlier in April after months of turmoil which followed questions about its financial reporting from short-seller Muddy Waters. NMC's shares were suspended two months ago and on Monday the company requested the delisting of its shares from the London Stock Exchange.

Some UAE banks have classified their debt exposure to the company as "doubtful", a UAE central bank document showed and one of the three sources familiar with the matter said.

Other banks in the UAE have higher recovery expectations for their exposure and may treat it as substandard, another source said.

The central bank did not immediately respond to a Reuters request for comment outside normal working hours.

The administrators for NMC declined to comment.

NMC, which has borrowed from a total of 80 local and international banks, disclosed $6.6 billion in debt last month, above $2.1 billion disclosed in June last year.

UAE banks said in stock exchange filings in the past few weeks they had more than 10 billion dirhams (2.18 billion pounds) in exposure to NMC. Abu Dhabi Commercial Bank <ADCB.AD> said it had an exposure to NMC of $981 million.

ADCB had said the credit it extended included syndicated loans alongside major global banks via senior unsecured facilities. The bank is chairing a steering committee of creditors that held an initial meeting last week, the sources said.

ADCB declined to make further comment.

Under UAE central bank regulations, doubtful loans can lead to specific provisioning of at least 50% for a bank on a troubled loan. "Substandard" loans require 25% provisioning.

"Every bank does its own classification and then at some point the central bank might come back and ask banks to get uniformity but this is at a later stage," the second source said.

One of the three sources said his bank started treating NMC exposure as "stage 3", requiring 50% provisioning.

Mohamed Damak, senior director at credit rating agency S&P, who oversees MENA financial institutions, said it was to be expected that the loans would be in stage 3 because the company is in administration.

"It is also equally important to remember that NMC is one of the leading privately owned operators of healthcare services in the UAE. Therefore, there will be a loss on debt but we don't think that it will be for the full amount of the exposures," he said.

UAE banks were told by the central bank last week to freeze the accounts of NMC Health shareholder and founder BR Shetty and his family and several other people, three sources with knowledge of the matter said.

(Reporting by Saeed Azhar, Davide Barbuscia and Hadeel Al Sayegh. Editing by Jane Merriman)