Wednesday, Jun 12, 2013


   (FROM THE WALL STREET JOURNAL 6/12/13) 
   By Joseph Checkler

NEW YORK -- A U.S. judge Tuesday approved Arcapita Bank B.S.C.'s plan to gradually liquidate itself in a process that conforms with Islamic Shariah law, which generally prohibits borrowing money with interest.

The Bahrain investment firm entered bankruptcy protection last year with a goal of restructuring itself but ended up with a plan to orderly liquidate its private-equity investments. Its modified proposal solved several concerns from creditors: It created a new entity that will retain Arcapita's management and handle the company's back-office functions, and it set a minimum valuation for the company's remaining assets that, if met, will allow the company to sell them.

Michael A. Rosenthal, an Arcapita lawyer with Gibson Dunn & Crutcher LLP, said the proposal allows the company to sell its assets "at a time and at a price that maximizes value."

"Who would've guessed the immense level of support, not only from the bank's creditors but also its shareholders," Mr. Rosenthal said.

"I am very happy to confirm this plan," said Judge Sean H. Lane of U.S. Bankruptcy Court in Manhattan. "This has been a very fascinating case for me."

Arcapita filed for Chapter 11 in March 2012 after finding itself unable to restructure a $1.1 billion loan. A lawyer for U.S. Trustee Tracy Hope Davis, the Justice Department's federal bankruptcy watchdog, said the case went smoothly considering Arcapita had to comply with Shariah throughout its Chapter 11. The firm manages real-estate, infrastructure, private-equity and venture-capital investments that are compliant with Shariah law.

Arcapita's only secured creditor, Standard Chartered PLC, will be paid in full for its nearly $100 million in claims. Also being paid in full is Goldman Sachs Group Inc., which provided Arcapita up to $525 million in a bankruptcy loan and exit financing.

General unsecured creditors of Arcapita and subsidiary Arcapita Investment Holdings Ltd. will initially divvy up $550 million, and they will recover more as Arcapita sells its private-equity investments. Those creditors also will get 97.5% of the reorganized Arcapita's equity.

In a statement, Arcapita Chief Executive Atif A. Abdulmalik said, "Reorganizing our business under Chapter 11 in the United States has been a challenging process, but it provided an effective framework to enable us to restructure the firm for the benefit of our investors, creditors, and other stakeholders."

More than 75% of existing Arcapita shareholders voted in favor of the proposal. They will be able to exchange shares for warrants in the reorganized firm.

(END) Dow Jones Newswires

12-06-13 0506GMT