Arcapita Bank receives disclosure statement OK; confirmation June 11

By Jim Witters

Wilmington, Del., April 26 - Arcapita Bank BSC received approval of the disclosure statement for its amended Chapter 11 plan of reorganization at an April 26 hearing in the U.S. Bankruptcy Court for the Southern District of New York, according a company press release.

The company also received an extension of its exclusive period for soliciting plan votes, according to court documents.

"The plan, which is supported by the official committee of unsecured creditors and an ad hoc group of certain of Arcapita's key creditors represents the most effective way to implement a comprehensive restructuring of Arcapita and maximize recoveries to creditors and other stakeholders," the release stated.

"Arcapita remains committed to working with its creditors to confirm the plan, and emerge from Chapter 11 as quickly as possible."

A hearing to confirm the plan is scheduled for June 11.

Plan overview

As previously reported, the amended plan of reorganization Arcapita filed on April 17 provides for the framework for a comprehensive restructuring that includes a sale of the company's portfolio investments.

Specifically, the agreement allows for the sale of the company's portfolio investments at a time and price that maximizes recoveries for both Arcapita's creditors and Arcapita's investors, who, in most cases, hold majority positions in the portfolio investments managed by Arcapita.

Also under the agreement, the investments will continue to be managed by Arcapita investment and deal professionals.

Amended plan terms

Specific terms of the amended plan include the following:

• Some reorganized debtors, new holding companies and/or members of the Arcapita group will enter into a Murabaha exit facility with a cost price of $250 million, which will be used to pay debtor-in-possession facility claims in full and to provide working capital as well as to potentially complete a take out of a Standard Chartered Bank facility;

• Standard Chartered Bank will receive a new Murabaha facility, provided, however, that the plan may be amended to give the bank cash in lieu of the new facility, with the cash distribution to be funded through an upsize of the exit facility;

• Holders of claims against Arcapita Bank will receive 15% of sukuk obligations, 45% of new Arcapita class A shares and 97.5% of new Arcapita ordinary shares.

Specifically, holders of syndicated facility claims and Arcsukuk facility claims will receive their share of 6.5% of the sukuk obligations and 19.6% of the new class A shares, and holders of general unsecured claims will receive a share of 8.5% of the sukuk obligations, 25.4% of the class A shares and 97.5% of the new ordinary shares.

However, general unsecured claimants will have the option to waive this distribution and receive cash equal to 50% of the lesser of the creditor's total claims against the bank or $25,000.

The total cash consideration payable to holders of convenience claims will not exceed $9.7 million;

• Holders of claims against Arcapita Investment Holdings will receive their share of 85% of the sukuk obligations, 55% of the class A shares, 2.5% of the ordinary shares and 100% of the new Arcapita creditor warrants;

• Holders of general unsecured claims against the Falcon debtor will receive their share of a percentage of Falcon available cash;

• Holders of intercompany claims, other than those owed by Arcapita Bank, Arcapita Investment or Falcon, will be reinstated.

Intercompany claims owed by Arcapita Bank and Arcapita Investment will be resolved as part of a settlement, which will pay holders $100 in cash per intercompany claim.

Holders of intercompany claims owed by Falcon will receive their share of Falcon available cash;

• Holders of subordinated claims against Arcapita Bank will receive their share of subordinated claim warrants, provided, however, that if the court rules that the plan cannot be confirmed because interests in the bank are reinstated or holders of a majority of Arcapita Bank shares do not agree to transfer those shares in exchange for warrants, holders of subordinated claims may not receive any distribution;

• Holders of subordinated claims against Falcon will not receive any distribution unless all other priority claims, other secured claims, general unsecured claims and intercompany claims against Falcon are satisfied in full, in which case they would receive a share of remaining Falcon available cash;

• Interests in debtors other than Falcon will be reinstated and, in connection with interests in Arcapita Bank, each holder of an Arcapita Bank share will be entitled to receive, in exchange for transferring all shares to New Arcapita Bank Holdco, a share of transferring shareholder warrants.

If the court rules the plan cannot be confirmed because of reinstatement of the interests or the holders of a majority of the Arcapita Bank shares do not agree to transfer their shares, all interests in Arcapita Bank will be canceled and all rights and new shares will be issued to the new holding company;

• Holders of interests in Falcon will not receive any distribution unless all other claims against the debtor are satisfied in full, in which case they would receive a share of a percentage of any remaining Falcon available cash; and

• Holders of super-subordinated claims against Arcapita Bank and Falcon will not receive any distributions.

Exclusivity extension

The bank asked the court to extend its exclusive filing period to July 7 from April 8.

The court granted an extension through the date of the plan confirmation hearing, which is June 11.

In seeking the additional time, Arcapita said it has continued to discuss plan-related issues with creditor groups to achieve support, particularly in connection with formalizing cooperation term sheet arrangements.

"Extending the exclusive solicitation period will enhance the debtors' efforts to be a fair broker by providing all parties in interest with additional time to identify and implement a resolution to any remaining plan issues," the company said in the motion.

"In short, the debtors are making obvious progress toward a consensual confirmation in an orderly and productive way."

Arcapita, a Manama, Bahrain-based investment bank, filed for bankruptcy on March 19, 2012. Its Chapter 11 case number is 12-11076.

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