Mar 20 2012
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Arcapita's 50 creditors
Who does Arcapita owe? A list of institutions the bankrupt firms owes shows the Central Bank of Bahrain is the biggest Arcapita creditor. Other major lenders include Riyad Bank and Mashreqbank .
In a grim reminder that many Gulf corporations are not out of the woods yet, Arcapita, the high-flying Bahraini investment firm filed for Chapter 11 in the United States on Sunday.
Arcapita has stakes in a number of companies across the world. From Aspen Aerogels in the United States to Compagnie Européenne de Prestations Logistique, in France, the company is invested in numerous entities, according to Zawya.com Corporate Monitor data.
For a complete list of companies Arcapita has invested in click here:
But the company that was first established in 1996 as First Islamic Investment Bank (FIIB) in Manama, has gone through its share of troubles as it tried to emulate the other major Bahrain-based investment firm Investcorp, but with a Shariah twist.
The region had only just recovered from the Saad Group and Ahmad Hamad Algosaibi & Bros . debt debacle of USD22-billion.
Although Arcapita's USD1.1-billion debt troubles are far less complex, they still highlight that Gulf corporations continue to suffer from the after-affects of the global financial crisis and leveraged-fuel growth.
Arcapita's filings for bankruptcy protection in the United States, shows that it owes USD255 million to the Central Bank of Bahrain.
The investment bank says the Bahrain central bank has "noted the bank's decision and it shall continue to monitor developments."
Other notable Gulf creditors include National Bank of Bahrain, which is owed USD132 million, Saudi Arabia's Riyad Bank which is owned USD75 million and UAE's Mashreqbank USD30-million, according to the Arcapita filing.
But it's Germany's Commerzbank that has emerged as Arcapita's second largest creditor, with a USD164-million bank loan.
The German bank was already reeling from the Greek and wider EU credit crisis. In the fourth quarter, the bank initiated a writedown around €700 million of Greek bonds. Bad loans had fallen to €381 million in the period from €595 million during the same period in 2010.
Atif A.Abdulmalik, the chief executive officer of Arcapita, said the action of hedge funds 'precluded' the investment bank from refinancing its $1.1 billion which was set to mature on March 28, thus "jeopardizing Arcapita's ability to satisfy its fiduciary duties to its stakeholders."
In the last three years, Arcapita has succeeded in managing its business to counter the effects of the financial crisis, said Abdulmalik.
"During this period, Arcapita has repaid $1.7 billion in maturing bank facilities, and stepped in with a further $900 million to support its investment portfolio. After plans to refinance a $1.1-billion financing facility coming due on March 28th 2012 were negatively impacted by the Eurozone crisis, Arcapita commenced discussions with the facility participants to extend it by three years. These negotiations started several weeks ago and began as a consensual and constructive process with the bank group which has supported us extensively through the downturn."
The company chairman Mohammed Abdulaziz Aljomaih believed that the board's decision to file for protection under Chapter 11 is not only a necessary step, "but the best course of action".
Arcapita said it will continue to manage approximately USD7.4-billion of assets, which include numerous U.S. real estate funds, apart from European industrial development and Indian business park development funds.
"At the same time, Arcapita will engage in discussions with its creditors and other stakeholders to develop an acceptable plan of reorganization which allows the company to emerge as an even stronger and more viable entity," the company noted.
The company filing notes that the company's executive investment committee also approved a USD200 million sale lease-back transaction of the Lusail assets with Qatar Islamic Bank.
The filing also shows CEO Abdulmalk presented the preliminary financial results for the six-month period till December 31, 2011.
More importantly, Abdulmalik also presented his business strategy for of the company, which was approved by the board, according to the filing.
The company is being advised in bankruptcy by Rothschild and the law firms Gibson Dunn & Crutcher; Linklaters; Trowers & Hamlins; and Hatim S. Zu'bi & Partners.
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