Milbank, Tweed, Hadley & McCloy is advising Arcapita creditors

26/04/2012 22:20 AST

Official Creditors' Committee members include Barclays and Commerzbank, as well as several hedge funds and Gulf-based banks and regulatory bodies. Creditors are expected to assert billions of dollars in claims.

Milbank, Tweed, Hadley & McCloy New York partner Dennis Dunne, who co-chairs the firm’s bankruptcy and restructuring practice, is leading the creditor engagement, along with New York partners Abhilash Raval and Evan Fleck, also members of the bankruptcy group.

Arcapita, whose investors include a number of sovereign wealth funds, high-net worth individuals, and other financial institutions in the Persian Gulf region, has a portfolio of some 39 companies, including Caribou Coffee and women’s retailer J. Jill as well as investments in real estate, energy, healthcare, manufacturing, homebuilding and business services.

On 19 March 2012, Arcapita Bank and several of its affiliates, including Arcapita Investment Holdings Limited, filed voluntary cases under Chapter 11 of the United States Bankruptcy Code. The filings were made in New York in the United States Bankruptcy Court for the Southern District of New York. The filing is the first test of how Shari'ah-compliant investment structures will be treated under the US Bankruptcy Code.

A significant portion of its holdings are in the US, along with substantial investments in Europe and Asia. Arcapita sought Chapter 11 protection after failing to refinance a $1.1 billion loan that was maturing. The case is pending before US Bankruptcy Judge Sean Lean in New York’s Southern District. There are also insolvency proceedings in the Cayman Islands and elsewhere.

Reflecting its roots as the first Islamic investment bank originally formed in 1996, Arcapita was structured in adherence to Shari'ah law, which forbids investment in any businesses that offer credit or charge interest, as well as other restrictions consistent with Islamic law. Arcapita’s debt was likewise designed to be Shari'ah-compliant.

CPI Financial