Saturday, Nov 03, 2012
(This story was originally published on Friday.)
Arcapita Bank has lined up a new $100 million bankruptcy loan from Fortress Investment Group LLC (FIG) that it says is compliant with Islamic Sharia law and wants approval to move forward with that loan quickly.
The loan from Fortress is for $50 million less than one Arcapita originally wanted from Silver Point Capital, although it can be increased to the same $150 million amount, the company said in a Thursday filing with U.S. Bankruptcy Court in Manhattan.
Several parties and a bankruptcy judge were concerned about some of the terms of the Silver Point proposal, including a charge that Silver Point could get out of the loan too easily and that the fees were too high. A hastily arranged hearing on whether the Fortress loan can move forward is set for Monday, the first day U.S. Bankruptcy Court in Lower Manhattan will be open since superstorm Sandy hit New York earlier this week.
"The Fortress Commitment is on substantially better terms than those offered by any other potential lender," Arcapita said in its filing. The loan has lower fees than the Silver Point package and allows Arcapita to shop for financing with better terms. It also contains a "more limited set of circumstances" for Fortress to get out of the loan. Lowering the commitment to $100 million, Arcapita said, could potentially lower the fees its estate pays to Fortress.
Like the Silver Point loan, Arcapita touts the Fortress financing the loan as what is believed to be the first bankruptcy financing package that would be fully compliant with Islamic Shariah law. The law generally prohibits borrowing money with interest. At the hearing on Monday, Judge Sean H. Lane will decide whether Arcapita can pay Fortress commitment fees that would move the loan forward.
Arcapita , which manages real estate, infrastructure, private equity and venture-capital investments that are compliant with Shariah law, sought Chapter 11 protection on March 19. At the time, it had $7 billion in assets under management.
The company is still exploring both a standalone plan with financing from Fortress and one that involves new money from a third party. If Arcapita doesn't file a plan by December and get it before the court for approval by the first quarter of 2013, it will lose control of its bankruptcy case, and other parties will be permitted to file their own plans for a restructuring.
The company has said the "building blocks" of its exit from bankruptcy are in place. While it is seeking new capital, it also has a backup plan of liquidating its investments to raise money for its creditors. Arcapita said allowing it time to pursue both options will ensure the best possible outcome for creditors.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)
Write to Joseph Checkler at firstname.lastname@example.org
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