| June 11
June 11 Bahrain investment firm Arcapita Bank
received approval from a U.S. Bankruptcy Court on Tuesday for
its plan to repay creditors, thought to be the first that is
compliant with sharia, Islamic law.
"I'm happy to confirm the plan," said Judge Sean Lane of the
U.S. Bankruptcy Court in Manhattan. "This has been a fascinating
case for me."
Under the plan of reorganization, Arcapita will repay its
only secured creditor, Standard Chartered Plc, in full.
Arcapita will transfer its assets to a new holding company which
will dispose of its investments over time, in an attempt to
avoid a firesale liquidation.
The company's unsecured creditors will receive the equity in
the new holding company as well as their pro rata share in a
sharia-compliant loan. General unsecured creditors are expected
to receive around 7.7 percent of the $1.9 billion they are owed,
according to court documents.
The largest unsecured creditor is the Central Bank of
Bahrain, which was owed $255.1 million.
The company provided alternative investment opportunities
for rich families, institutions and sovereign wealth funds in
the Gulf region, but sought bankruptcy last year as a $1.1
billion loan came due.
The fund's investment were sharia-compliant, as is the $350
million loan that Arcapita arranged to fund its wind-down
operations after its exits bankruptcy.
Sharia prohibits borrowing money with interest. Instead, the
so-called murabahah structure effectively treats the arrangement
as a sale, incorporating a profit margin and fees instead of
Arcapita filed for bankruptcy protection in March 2012 with
about $7.4 billion in assets under management.
The move was unprecedented in a region where most debt
workouts have involved consensual talks that ended in long
Arcapita was represented by Michael Rosenthal of Gibson,
Dunn & Crutcher.
The case is In Re: Arcapita Bank BSC et al, U.S. Bankruptcy
Court, Southern District of New York, No. 12-11076.