Arcapita: how non-US firms can use Chapter 11

Author: Gemma Varriale | Published: 11 Dec 2013
Arcapita provides a clear roadmap for recovery
The successful restructure of Bahrain-based investment company Arcapita has raised questions about how other non-US companies can take advantage of Chapter 11 of the US Bankruptcy Code.

Arcapita is a vanguard case for the Middle East, with analysts saying that it represents the first true post-financial-crisis debt restructuring by a GCC company. While previous debt workouts in the region have typically seen companies renegotiate terms on their debt, Arcapita's bankruptcy plan provides a clear roadmap for recovery.

Key issues raised following the restructure are the availability of Chapter 11 for entities with a limited nexus to the US, breadth of the automatic stay and its effectiveness in holding off creditors, and the power of debtor-in-possession (DIP) facilities to create liquidity.

"In particular, companies have been asking if Chapter 11 proceedings help a debtor to survive and rehabilitate itself, but almost inevitably results...