IFFCO debt battle reaches court

Dubai food group IFFCO is poised for provisional liquidation after months of debt restructuring talks failed to produce agreement, pushing a major Gulf consumer-goods business into a court-led process as creditors seek to protect assets and stabilise operations.

A lender group led by HSBC Holdings has initiated legal proceedings to take control from the owners, with FTI Consulting nominated to act as provisional liquidator. The move follows a prolonged stand-off over roughly $2 billion in borrowings and marks a significant escalation for one of the region’s largest food and fast-moving consumer goods groups.

IFFCO’s position has been weakened by overlapping pressures: heavy leverage, creditor fatigue, shareholder disputes and a deteriorating operating environment linked to the US-Iran conflict. The war has disrupted Gulf trade flows, raised shipping risks and added fresh uncertainty to food supply chains that depend on predictable imports, commodity financing and cross-border logistics.

The group, controlled by the Allana family, has built a wide portfolio spanning edible oils, packaged foods, frozen products, biscuits, personal care, animal feed and industrial ingredients. Its brands and manufacturing network give it a prominent role in food distribution across the Gulf, South Asia, Africa and parts of the wider Middle East. That scale made its debt talks closely watched by lenders with exposure to regional family-owned conglomerates.

Rothschild & Co took over as restructuring adviser last year, replacing Alvarez & Marsal, as IFFCO sought to negotiate with banks and review options for improving liquidity. Those talks involved proposals to extend maturities, reorganise borrowings and potentially reshape the business through asset sales or operational changes. The failure to reach a consensual agreement has now shifted the balance of power towards creditors.

Provisional liquidation does not automatically mean a company will be broken up or permanently wound down. The process is often used to preserve value while creditors and court-appointed professionals assess assets, liabilities and viable options. For IFFCO, the immediate priority will be maintaining business continuity, protecting working capital and preventing disorderly creditor action that could damage suppliers, employees and customers.

The lender move also reflects a tougher approach by banks after several years of restructuring fatigue in the Gulf, where family-owned groups often borrow across multiple jurisdictions and operating subsidiaries. Creditors have become more willing to use legal tools when private negotiations stall, particularly where they fear value leakage, asset transfers or prolonged uncertainty.

IFFCO’s food-sector footprint adds sensitivity to the case. The UAE imports the bulk of its food needs and relies on diversified supply chains, warehousing and re-export hubs to keep shelves stocked across domestic and regional markets. Large distributors and processors play a critical role in cushioning price swings, managing inventories and sustaining supply during periods of shipping disruption.

The US-Iran conflict has sharpened those risks. Insurance costs, freight delays, port congestion and commodity volatility have hit companies that depend on regional maritime routes and imported raw materials. Food businesses are exposed not only to shipping costs but also to fluctuations in palm oil, grains, sugar, dairy inputs, packaging and energy. Higher finance costs have further strained working capital for leveraged groups.

IFFCO’s difficulties therefore go beyond a single corporate balance sheet. They underline the vulnerability of highly leveraged consumer-goods groups operating in a region where food security is a strategic priority and trade routes remain exposed to geopolitical shocks. Even companies with strong brands and broad distribution networks can face pressure when debt servicing, supplier payments and operational disruptions converge.

HSBC’s leadership of the creditor group is also notable because global banks have been reassessing exposure to complex regional borrowers. Lenders are under pressure to recover value while avoiding abrupt actions that could impair viable operations. A court-supervised provisional liquidation offers a structured route, though outcomes will depend on the quality of assets, creditor alignment and the willingness of stakeholders to support a turnaround.

For IFFCO’s owners, the process represents a loss of control at a critical moment. Family businesses across the Gulf have traditionally relied on relationship banking and negotiated workouts, but larger debt piles and cross-border creditor groups have made informal solutions harder to sustain. Transparency, governance and asset ring-fencing are likely to be central issues as the case advances.