Arcapita Bank BSC, a manager of Islamic-compliant investments with $7 billion under management, was forced into bankruptcy by hedge funds that sought to be repaid in full, a lawyer said.
Restructuring talks on the company’s $1.1 billion loan due in March “were derailed when several hedge funds who bought that debt on the secondary market at a discount threatened an involuntary bankruptcy if they didn’t receive par” on their investments, attorney Michael Rosenthal told U.S. Bankruptcy Judge Sean Lane in Manhattan. One of the hedge funds is Euroville Sarl, he said.
The company sought Chapter 11 protection in New York this week to “preclude preemptive action” and preserve its assets, Rosenthal said.
Euroville, which holds $88.7 million in the company’s debt, is concerned that some of its assets could be placed out of creditors’ reach in bankruptcy, its lawyer, David Friedman, told Lane. “We’re afraid that the assets will be sent to places where none of us will be able to repatriate them.”
Friedman said issues of concern include $96.3 million a year in payments to unidentified consultants, and the sale of an asset, Lusail, 14 days prior to its bankruptcy to Qatar Islamic bank (QIBK), which has a relationship with Arcapita.
Arcapita, formerly known as First Islamic Investment Bank, filed Chapter 11 March 19 along with five affiliates, listing assets of $3.06 billion and liabilities of $2.55 billion. Arcapita Investment Holdings Ltd., already in U.S. bankruptcy, has also filed a bankruptcy in the Cayman Islands in aid of the Chapter 11 proceeding.
The two filings were made to avoid “an involuntary and value-destructive straight liquidation proceeding in the Cayman Islands,” Arcapita said in court papers.
The company’s investments, which have included U.S. brand names such as Caribou Coffee and Church’s Chicken, now include Irish power utility Viridian Group Ltd. (VRD), and U.S.-based Falcon Gas Storage Co. Other assets include interests in PODS, a portable moving and storage company founded in Florida, and Tensar International Corp., a provider of soil technologies based in Atlanta, Arcapita said in court papers.
Elpida Gets Court Approval for Sakamoto to Lead Revival Plan
Elpida Memory Inc. (6665) got court approval for President Yukio Sakamoto to lead the company’s revival after it filed for Japan’s biggest bankruptcy in two years because of falling chip prices and a strong yen.
The Tokyo District Court approved Elpida’s current management, the chipmaker said in a statement. The company, also based in Tokyo, plans to submit a restructuring plan by Aug. 21, it said. Lawyer Nobuaki Kobayashi, who has aided the company in its filing, was also appointed a trustee.
Elpida, the last Japanese maker of dynamic random access memory, or DRAM (DRAM84), filed for bankruptcy with liabilities of 448 billion yen ($5.4 billion) on Feb. 27. The chipmaker’s troubles were exacerbated by falling prices and a stronger yen after it received financial support from the government and lenders in 2009. The company, whose customers include Apple Inc., will be delisted from the Tokyo Stock Exchange on March 28.
“Sakamoto knows the industry and Elpida,” said Ichiro Takamatsu, a fund manager at Bayview Asset Management Co. in Tokyo. “The company is in the commodity industry, which offers limited ways for management to come up with creative solutions.”
DRAM prices plunged to a record low last year after PC shipments missed analyst forecasts. The price of the benchmark DDR3 2-gigabit DRAM declined to a record 71 cents in November, compared with $4.85 on Sept. 1, 2010, amid slowing personal- computer sales, according to DRAMeXchange, Asia’s biggest spot market for the chips.
Elpida was formed through the 1999 merger of NEC Corp.’s and Hitachi Ltd.’s memory businesses. Fujitsu Ltd. abandoned the business that year, and Toshiba Corp. announced its withdrawal in 2001 to focus more on making NAND flash memory chips, which are used in tablet computers and smartphones.
The company also filed court papers with the U.S. Bankruptcy Court in Wilmington, Delaware, on March 19 listing more than $1 billion in assets and debt. It asked the court to recognize the Japanese case as the main bankruptcy proceeding.
Portugal Towns May Default on $12 Billion Debt Without Aid
Portugal’s town halls face default amid 9 billion euros ($12 billion) of debt unless the government provides aid soon, said Fernando Ruas, president of the nation’s association of municipalities.
“At a company we call it insolvency,” Ruas said in a telephone interview from Lisbon. “It could happen that some town halls could have to restructure their debt if the government doesn’t intervene.”
Ruas blamed a decline in money transfers from the government in Lisbon to municipalities for their growing financial woes. Portugal last year became the third euro-area country to request external aid, following Greece and Ireland. Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of the 78 billion-euro rescue.
“A sharp decrease in money transfers has made it harder for many town halls to comply with their ongoing commitments,” said Ruas. His association estimates town halls face about 9 billion euros in liabilities. About 1.5 billion euros of the total is in bills to suppliers overdue by more than 90 days while the remainder is mostly made up of debt to banks, he said.
The southern European country’s 308 town halls and two semi-autonomous regions face similar issues to those of Spain, whose regions and municipalities have been shut out of capital markets due to the credit squeeze, leaving many bills to suppliers unpaid. Spain’s government is offering them loans to help pay suppliers.
Money-transfers from the central government to town halls are set to decline 4.7 percent this year to 2.28 billion euros from a year earlier, according to Portugal’s 2012 budget. To cut costs, Portugal is encouraging some town halls to merge as part of a plan to re-organize local governments, the government said in a statement on Feb. 2.
“The high level of indebtedness of town halls across the country is nothing new,” said Joao Cesar das Neves, a professor of economics at Lisbon’s Catholic University. “The government had little control over the country’s municipalities, which spent way beyond what is admissible.”
Madoff Trustee Appeals $59 Billion UniCredit, Kohn Court Ruling
The liquidator of Bernard Madoff ’s firm appealed a district court ruling that tossed most of his $59 billion in claims against Italy’s UniCredit SpA, Sonja Kohn and other defendants, according to an appeal record filed in Manhattan court.
BTA Bank Says Creditors Approve Babayan, Brzezinski as Directors
BTA Bank said Sergey Babayan and Jacek Brzezinski were selected as directors representing the interests of creditors on the Kazakh lender’s board, according to a statement.
The bank’s shareholders will vote on the nominees at an extraordinary general meeting to be held on Apr. 11, BTA said in the statement.
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