Arcapita Bank B.S.C.(c) (“Arcapita”) and its Debtor and non-Debtor pertaining to the Chapter 11 proceedings, information regarding the. Companies operating in the U.S. have several legal options for managing unsustainable levels of debt. One such option is Chapter 11 of the U.S. Bankruptcy. Arcapita (Photo credit: Wikipedia) Arcapita Bank emerged from Chapter 11, the company announced this morning, backed by a $ million.
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Companies operating in the U. One such option is Chapter 11 of the U.
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Bankruptcy Code, which governs how a company can reorganize its debt in order to keep the business running and repay its creditors over time. Debt is not forgiven through Chapter 11; the process simply establishes the new conditions under which it or at least a portion of it cahpter be paid back to creditors with future cash flows. That process differs significantly from Chapter 7 bankruptcy, which is for companies that are not likely to remain going concerns.
Those businesses must liquidate their remaining assets to pay back creditors as much as possible. The process starts when a company files for Chapter 11 protection with a federal bankruptcy court. During a series of hearings, the debtor proposes restructured terms with its creditors. Those terms might include the chspter and timing of repayments. While a company is allowed to continue operations during the Chapter 11 process, certain decisions or powers controlled by the bankruptcy court including the sale of assets, payment of vendors, and changes to business operations.
We reduced our staff, cut costs and monetized assets wherever we could. We also searched for ways to refinance that debt or to raise the cash to pay it off.
We believed that we had sufficient assets on our balance sheet, so we asked for a three-year window that would give us sufficient additional time to monetize our assets in an orderly manner. Those efforts proved unsuccessful. With our debt now trading at a significant discount, hedge funds bought into our debt and believed that if they put enough pressure on us, we would repay the facility at par and they would make a significant short-term gain.
Our shareholders had supported us in many ways over the previous several years but we did not feel it was prudent to request them to provide additional capital to repay our maturing financing facility. We arcapiya decided that the best course of action was to file for Chapter 11 protection in the U. Entering into Chapter 11 was an extremely difficult decision but chaptre hindsight proved to be a very good option for Arcapita because it gave us the time to maximize returns for our stakeholders, especially our investors.
We were the first entity in the Middle East to use Chapter We were confident that our underlying business still worked, and that Chapter 11 gave us the best chance to maximize proceeds for our stakeholders.
Court approved the reorganization plan in June and Arcapita emerged from Chapter 11 three months later. In the autumn ofafter the fall of Lehman Brothers, a global liquidity crisis set in. Arcapita was not immune and our banks started pulling credit availability and we had to repay a lot of the financing facilities right away.
Eventually, many of our portfolio companies were also looking to us for cash infusions because of their own challenges.
We arapita significant overhead, with operations in four countries and nearly employees so our cash was suddenly being drained rapidly. Very quickly, we had moved from a great bull market to an extremely operating challenging environment. Arcapita emerged from Chapter 11 in September with a new balance sheet. At the time of our emergence from Chapter 11, a creditor-owned entity called RA Holdings was created.
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Over the last three years, we managed the orderly monetization of the legacy capter. The goal was to create a new and improved firm. And, we wanted to expand into new and emerging areas of investment, such as the halal economy and financial technology, where we saw growth potential and particular promise for our investors.
We believe fhapter the same opportunity that led us to form Arcapita in the first place still exists. Companies emerging from Chapter 11 typically take on a new name and leave the old name behind. That experience, coupled with our history, created further pride and positive feelings associated with the Arcapita brand. It became clear to us that the Arcapita name still had meaning for many of our investors, and we wanted arcapitq honor those feelings by maintaining the name.
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What is Chapter 11? Were there alternatives available to Arcapita? How did Arcapita fare during the Great Recession? How did the Chapter 11 process lead to the Arcapita of today? Was the idea to simply pick up where Arcapita left off before Chapter 11? Contact Bahrain London Atlanta Singapore. Explore Chapteg Us Overview.
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