Arcapita creditors committee calls case 'bleak,' sets Dec. 15 deadline

By Jim Witters

Wilmington, Del., Oct. 5 - Arcapita Bank BSC's official committee of unsecured creditors has agreed to a 60-day extension of the company's exclusive periods for filing a Chapter 11 plan and for soliciting acceptances of the plan, but it says there is no reason the company cannot file a plan immediately that "would allow the debtors to emerge promptly from Chapter 11 protection," according to a statement filed Oct. 5 with the U.S. Bankruptcy Court for the Southern District of New York.

Arcapita is seeking a 60-day extension through Dec. 15 of its exclusive period for filing a Chapter 11 plan.

"Despite the debtors' depiction in the motion of their purported achievements over the past six months, the reality of these cases is bleak," the creditors committee wrote.

The committee has agreed not to oppose a final extension through Dec. 15, under certain conditions.

Settlement terms

Under the terms of the agreement:

• By Nov. 1, the debtors must have new money equity commitments of $250 million or more deposited in escrow or an irrevocable letter of credit from a lender in New York or London;

• The debtors and committee shall have entered into an agreement that reflects the consent of the new money equity commitments that at least 75% of the deposited funds will be earmarked for distribution to the prepetition unsecured creditors holding allowed claims under a Chapter 11 plan;

• If the debtors fail to satisfy the preceding conditions, the debtors will begin on Nov. 1 "immediately and exclusively" to negotiate with the creditors a Chapter 11 plan;

• Exclusivity will expire on Dec. 15, and the debtors will not seek any further extensions. If the debtors file a plan by Dec. 15, they reserve the right to seek further extensions of the exclusive solicitation period; and

• The debtors will immediately begin good faith discussions with the committee and other parties in interest regarding a plan that provides for an orderly wind-down of their businesses and assets.

"Based on the debtors' track record to date, the committee is skeptical that the debtors will meet these targets," according to the statement.

No reason for delay

In seeking the extension, Arcapita said it must still complete negotiations with potential providers of exit financing, complete a full and balanced assessment of possible exit strategies, complete negotiations with constituents of the estates and "then file the plan or plans of reorganization now being formulated."

"What the company requires is simply a balance sheet restructuring. No reason exists to delay the filing of a plan that would allow the debtors to emerge promptly from Chapter 11 protection. To the contrary, any further delay is prohibitively costly," the committee says.

Arcapita has been trying to sell "the potential upside in their assets to unidentified third-party investors on terms that the committee believes are likely too favorable to those investors to gain unsecured creditor approval," according to the committee statement.

Meanwhile, "absolutely no meaningful progress has been made towards addressing the only issues that must be resolved in order for the debtors to emerge from Chapter 11, i.e., the allocation of value between the creditors of Arcapita Bank and AIHL," the committee states.

More than six months into the bankruptcy case, "the debtors have not made any meaningful effort to negotiate with the committee on the terms of a Chapter 11 plan," the statement says.

"As soon as a reasonable and realistic plan for distribution of the debtors' assets can be agreed upon, the committee is well positioned to broker an agreement among the relevant creditor constituencies using probability weighted assessments of litigation to resolve the intercreditor issues," according to the committee statement.

The committee wants the debtors to abandon efforts to secure third-party equity investment and focus on confirming a "long-overdue, controlled wind-down plan."

A hearing is scheduled for 2 p.m. ET on Oct. 9.

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

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