Monday, May 07, 2012


 
    By Joseph Checkler 
    Of DOW JONES DAILY BANKRUPTCY REVIEW

NEW YORK (Dow Jones)--A judge said Monday that Arcapita Bank could continue using its cash-management system and bank accounts, as the Bahrain investment firm began to report incremental progress in a bankruptcy case packed with complications both here and overseas.

Judge Sean H. Lane of U.S. Bankruptcy Court in Manhattan again approved a limited budget laid out by Arcapita, which says it has been careful with its cash since filing for Chapter 11 in March. He also approved other requests, including the company's request to use its money to continue paying its employees and the professionals handling its case.

Gibson, Dunn & Crutcher LLP's Michael A. Rosenthal, an Arcapita lawyer, said that while the company set a $1.8 million budget for the three-week period from March 19 to April 28, it actually generated cash of $3.8 million during that period. Arcapita has been presenting its proposed budgets and cash-management requests to the court three weeks at a time instead of presenting a "final" order that would preclude the need to come to court for the requests.

Arcapita, whose Cayman Islands operating subsidiary owns 100% of the company's stock, is also working with restructuring firm Zolfo Cooper as a liquidator in Cayman and said the relationship has been "productive" over the past three weeks.

Rosenthal said the company's relationship with creditors has been "frank," adding the two sides did have a recent "dust-up."

In a filing made last week, lawyers for Arcapita's official committee of unsecured creditors said the company has given the committee only "limited" involvement in the case and that it had problems with some of Arcapita's Monday requests. However, the two sides worked out all the differences before Monday's hearing, mostly making small changes related to the fees for professionals and how creditors will be notified of changes.

Milbank, Tweed, Hadley & McCoy's Dennis F. Dunne, a lawyer for the creditors, said one of his biggest concerns in the case is that the company doesn't have a bankruptcy loan, and if by the nature of its investment-centric business it's forced to make a funding commitment, "The cash in the system may be 'it.'" Lane said he understood the concerns but that could be a matter for later in the case.

Rosenthal said the company has about $150 million in its existing bank accounts, although about $35 million is still tied up in accounts with foreign banks that are balking at freeing up the money. Rosenthal said those banks have yet to respond positively to letters requesting the money and that Arcapita would take stronger steps starting this week.

Arcapita, which invests in private equity, infrastructure, venture capital and real estate, filed for Chapter 11 protection in March after finding itself unable to restructure the $1.1 billion credit facility. It has several operating subsidiaries and portfolio companies, including German PVC window and door profile maker Profine and French logistics group Compagnie Europeenne de Prestations Logistiques.

Prior Arcapita investments include Caribou Coffee Co. (CBOU), which it took public in 2005, and Church's Chicken, which it sold in 2009.

The company owns assets valued at about $3.06 billion and has liabilities of $2.55 billion. It also manages $7 billion in assets.

Last week, Arcapita put Falcon Gas Storage Co., one of its nonoperating subsidiaries, into Chapter 11 protection in the U.S.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to: http://dbr.dowjones.com.)

-By Joseph Checkler; 212-416-2152; joseph.checkler@dowjones.com; Twitter: @JoeCheckler

(END) Dow Jones Newswires

07-05-12 1648GMT