Arcapita files for bankruptcy protection

20 March 2012

Bahrain-based investment house fails to agree deal to refinance $1.1bn loan

Bahrain-based investment house Arcapita has filed for bankruptcy protection in the US after failing to agree a refinancing plan for a $1.1bn loan due to mature on 28 March, the company has announced.

Arcapita blamed its inability to agree a refinancing plan on “non-bank creditors”, which it said “have precluded Arcapita from reaching such a consensual resolution before the March 28th maturity date.”

Talks with a committee of lenders including the UK’s Barclays, Standard Chartered and Royal Bank of Scotland, had started several weeks ago to discuss Arcapita’s plan to extend the loan by three years.

Mohammed Abdulaziz Aljomaih, chairman of Arcapita, said the Chapter 11 bankruptcy filing would “allow Arcapita to restructure its balance sheet and reorganize its business to maximize recoveries for all creditors and other constituencies.”

The hedge funds holding Arcapita’s debt are understood to have rejected Arcapita’s attempts to extend the loan. They had been building up positions in the company through purchases of the investment bank’s debt on the secondary market since late last year.

“Everyone was expecting a repayment and then a refinancing of around $700m for another three to five years, which banks would probably have agreed to,” says one banker close to the situation. “But the hedge funds want a much quicker resolution than that.”

By filing for bankruptcy protection, Arcapita says it is protecting its assets from claims by creditors who may try to force the sale of its investments to settle individual debts to the detriment of other creditors.

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