Chapter 11 is a chapter of the United States’ Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities.
Arcapita’s Board of Directors has approved this course of action as the most effective way to protect their business and assets and implement a comprehensive restructuring that rationalizes Arcapita’s capital structure and maximizes recoveries to creditors and other stakeholders. The filings automatically imposed a worldwide injunction against collection and enforcement actions that will protect the assets of the Arcapita entities while a plan of reorganization is formulated. None of Arcapita’s operating subsidiaries or portfolio companies are included in the filing.
“In the last three years, Arcapita has succeeded in managing its business to counter the effects of the financial crisis. 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,” Atif A. Abdulmalik, Chief Executive Officer of Arcapita said.
“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. However, the actions of certain non-bank creditors have precluded Arcapita from reaching such a consensual resolution before the March 28th maturity date, jeopardizing Arcapita’s ability to satisfy its fiduciary duties to its stakeholders. The filings offer Arcapita the necessary protection it needs to complete productive negotiations with all parties.”
“After reviewing all the available options with management and its financial and legal advisors, the Board has agreed that a filing for protection under Chapter 11 is not only a necessary step, but the best course of action, to safeguard the interests of the bank’s stakeholders. It will allow Arcapita to restructure its balance sheet and reorganize its business to maximize recoveries for all creditors and other constituencies,” Mohammed Abdulaziz Aljomaih, Chairman of Arcapita’s Board of Directors, said.
The provisions allow the filing companies to continue to operate their businesses and manage their properties under the direction and control of their Boards and management. Thus, during the process, Arcapita’s management team will be able to conduct business in the ordinary course. All of the portfolio companies will continue to be managed by Arcapita’s deal professionals and decisions related to asset disposal will also remain with Arcapita. Arcapita will continue to manage approximately $7.4 billion of assets. 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.
“This was a difficult decision. But after lengthy review of all the alternatives open to us, there is no question that this is the right course of action, which we are taking with the support of the Board. The Central Bank of Bahrain has been informed and we will continue to have a dialogue with the regulators,” Abdulmalik added.
“Arcapita is committed to completing this reorganization as quickly and efficiently as possible. Our aim is to maximize recoveries for the benefit of all stakeholders. We have sufficient liquidity to manage our business and are fully focused on minimizing disruption to our investment portfolio, which Arcapita’s professionals will continue to manage on behalf of our investors. Asset sales will only be carried out at a time we consider to be the appropriate point in the investment cycle. The Arcapita platform, with its ability to distribute high quality alternative investments in the GCC and beyond, remains strong and well respected. We have close and longstanding relationships with our investors, partners and relationship banks and we are very grateful for their steadfast support. I have full confidence that as economic fundamentals improve; we will continue the profitable business of buying, improving and selling investments around the world, generating returns for our investors and value for all our stakeholders.”
Arcapita’s legal advisors are Gibson Dunn & Crutcher and Linklaters, and its financial advisor is Rothschild.