Bahrain’s Arcapita completes US Chapter 11 bankruptcy process

The investment firm will now embark on an orderly sale of its assets after emerging from Chapter 11 bankruptcy proceedings in the United States.

The Bahraini investment firm Arcapita hit the headlines in March last year when it filed for Chapter 11. Above, Arcapita's headquarters under construction at Bahrain Bay in 2012. Razan Alzayani / The Show more

The beleaguered Bahraini investment firm Arcapita said yesterday that it had formally emerged from Chapter 11 bankruptcy proceedings in the United States, paving the way for an ordered sale of assets to pay off its creditors.

The announcement comes almost 18 months to the day after the investment company became the first Middle Eastern entity to file for bankruptcy protection in the US courts, after failing to reach agreement with creditors about the restructuring of a US$1.1billion loan.

Under the terms of the reorganisation, approved by the courts in June, the company’s investment portfolio will be managed by New Arcapita (legally referred to as Aim Group Ltd), led by the existing management team, with the objective of maximising exit values across the portfolio, the company said.

The new entity has been established to conduct an orderly disposal of assets to avoid a fire-sale liquidation of the company.

RA Holding, a new entity owned by the creditors, will determine the value of Arcapita’s investment portfolio, the statement said.

“Chapter 11 was a challenging experience, but one which has enabled us to deliver a solution in the best interests of our investors, creditors and other stakeholders,” said Atif Abdulmalik, Arcapita’s chief executive. “Under New Arcapita, we will be able both to assist RA and investors to maximise the value of the existing investment portfolio and to undertake new investment opportunities.”

The reorganisation plan, which formally came into effect yesterday, includes a $350 million Goldman Sachs-led Sharia-compliant financing facility. This will be utilised to fund operating cash flow requirements of post-reorganisation RA and certain obligations in connection with the reorganisation, the company said.

Arcapita hit the headlines in March last year when it filed for Chapter 11.

The company was obliged to seek protection from the courts after hedge funds that had bought into the secondary market refused to agree to a consensual out-of-court debt restructuring as they targeted the company’s US assets.

“Chapter 11 provided a comprehensive and transparent framework to restructure the business. We appreciate the strong support that we received from our stakeholders and look forward to delivering future value to investors,” said Abdulaziz Aljomaih, Arcapita’s vice chairman of the board of directors.

The strategy is similar to that employed by Drydocks World, which became the first company in the UAE to use a legal avenue to approve its debt restructuring plan, filing a commercial voluntary arrangement in the Dubai World Tribunal in April last year.

Arcapita’s plan allows for the full payment of debts to Standard Chartered, Arcapita’s sole secured creditor. General unsecured creditors – the largest of which is the Central Bank of Bahrain, owed $255.1m – are expected to receive about 7.7 per cent of the $1.9bn they are owed, according to court documents.