Arcapita, WorldSpreads, Elpida, Humpuss Sea: Bankruptcy
Arcapita Bank BSC, a manager of Islamic-compliant investments with $7 billion under management, filed for bankruptcy in the U.S. after failing to reach an agreement with creditors.
Arcapita, formerly known as First Islamic Investment Bank, and five affiliates sought Chapter 11 protection in U.S. Bankruptcy Court in Manhattan, listing assets of $3.06 billion and liabilities of $2.55 billion.
“This global recession has hampered the Arcapita Group’s ability to obtain liquidity from the capital markets, and has also resulted in a reduction in asset values,” lawyers for the company wrote. Arcapita’s board approved the process “to protect their business and assets and implement a comprehensive restructuring,” the Manama, Bahrain-based private-equity firm said in an e-mailed statement.
Founded in 1996, the company manages Shari’ah-compliant, or Islamic compliant investments and operates as an investment bank, according to the filing. It has 268 employees and along with its affiliates, has $7 billion in assets under management, according to the filing. It owns Irish power utility Viridian Group Ltd., and helped that company refinance its debt earlier this month with equity.
Arcapita failed to reach an agreement with creditors on a $1.1 billion syndicated shari’ah complaint loan due this month.
The bankruptcy filing is a “logical step by the company to protect its foreign investments and from individual creditors going after the company’s assets in Europe, the U.S. and Asia,” Serge Lioutyi, a London-based distressed debt trader at Citigroup Global Markets Ltd. said in an e-mail. It “will help the company focus on reaching a consensual agreement with creditors rather than worrying about individual claims.”
Arcapita is among companies in Bahrain that have sought protection to restructure liabilities after the global credit crisis cut their access to the debt market and as asset prices declined. Awal Bank BSC, a Bahrain-based wholesale bank, filed for Chapter 11 in October 2010, while Gulf Finance House BSC reached an agreement with a group of banks led by WestLB AG on a new two-year $100 million Islamic loan.
WorldSpreads Has 13 Million-Pound Shortfall in Client Money
WorldSpreads Group Plc (WSPR), a U.K. brokerage and spread betting company, said it has a shortfall of 13 million pounds ($21 million) of client money as it appointed KPMG LLP as an administrator to manage the business.
WorldSpreads owes clients 29.7 million pounds and has about 16.6 million in cash, the London-based company said in a statement. The firm’s stock was suspended on March 16 after it discovered a hole in its accounts.
“Due to the accounting irregularities that have been discovered, it is likely that there will be a shortfall to clients,” KPMG said in a separate statement. “One of the immediate priorities of the special administrators will be to investigate and attempt to reconcile all client positions in order to establish the extent of the shortfall.”
WorldSpreads’s founder, chief executive officer and largest individual shareholder, Conor Foley, resigned March 14. Roger Hynes, a former managing director at CMC Markets Plc, replaced him as interim CEO. Niall O’Kelly resigned as chief financial officer in February as WorldSpreads said it would post a full- year loss after an “unusual pattern of client trading.”
Clients’ accounts were frozen on the afternoon of March 16, preventing them from withdrawing money or adding to their funds, according to Sorrelle Cooper, a spokeswoman for KPMG in London. Any open positions were also closed, she said.
WorldSpreads clients facing losses may have access to the Financial Services Compensation Scheme, which covers as much as 50,000 pounds per claimaint, the Financial Services Authority said in a separate statement.
The firm has about 15,000 client accounts and 66 employees, who will be initially retained “to support the orderly wind down of the business,” KPMG said. Redundancies are nonetheless probable, it said.
Elpida Seeks U.S. Protection During Japanese Bankruptcy
The Tokyo-based chipmaker filed court papers in the U.S. Bankruptcy Court in Wilmington, Delaware, listing more than $1 billion in assets and debt. It asked the court to recognize the Japanese case as the main bankruptcy proceeding.
Chapter 15 of the bankruptcy code allows foreign companies reorganizing abroad to protect their assets from creditors and lawsuits in the U.S.
Elpida last month filed the biggest Japanese bankruptcy in more than two years, after semiconductor prices fell and it failed to obtain a second government bailout. The company, which makes dynamic random access memory, or DRAM, chips, listed debt of about 448 billion yen ($5.4 billion) in a Feb. 27 filing with Japan’s finance ministry.
“This Chapter 15 case is being filed in an effort to maximize recoveries to, and provide for an equitable distribution of the value among, all creditors,” the company said in court papers.
The chipmaker seeks to protect the stock of its Elpida Memory USA Inc. unit, accounts receivables held at the unit totaling 5.8 billion yen ($69.5 million), as well as patents registered in the U.S.
“The enjoining of certain ongoing litigation to which Elpida is a party and the protection of Elpida’s U.S. assets in conjunction with the protections afforded by the Japan proceeding is essential to this effort,” the company said.
Elpida was formed through the 1999 merger of NEC Corp.’s and Hitachi Ltd.’s memory businesses. Elpida employed 5,898 people as of March 31, according to data compiled by Bloomberg.
Humpuss Sea Transport Files for Chapter 15 Bankruptcy
Humpuss Sea Transport Pte Ltd., a Singapore-based unit of an Indonesian shipping company, filed for Chapter 15 bankruptcy protection in the U.S.
The unit of Jakarta-based PT Humpuss Intermoda Transportasi (HITS) is already under the control of liquidators in Singapore, where it was incorporated in 1996, according to the filing in U.S. Bankruptcy Court in Manhattan. Debt and assets were listed at more than $100 million.
“Following the global financial crisis in 2008, shipping rates (HST’s primary source of revenue) sharply decreased,” Jason Aleksander Kardachi, a liquidator for the company in Singapore, said in court papers.
Proceedings against Humpuss Sea to make required payments under charter agreements led to judgments totaling as much as $100 million, according to court papers. Company records from 2009 indicate assets of $182 million, Kardachi said.
Under Chapter 15 of the bankruptcy code, foreign companies can block U.S. lawsuits and organize U.S. creditors to assist their reorganization in a foreign court. Humpuss Sea is a defendant in a lawsuit in New York and liquidators in Singapore may need help from U.S. parties to recover assets, lawyers for the company wrote.
Shipping companies that have filed for bankruptcy in recent years include General Maritime Corp., Korea Line Corp. (005880), Britannia Bulk Plc, Armada (Singapore) Pte Ltd. and Transfield ER Cape.
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