By Nick Brown
NEW YORK, Nov 7 (Reuters) - Bahrain-based Arcapita Bank
gained court approval on Wednesday for a $125 million bankruptcy
loan from Fortress Investment Group, believed to be the first
such loan consistent with sharia, Islamic law.
The loan, approved by Judge Sean Lane in U.S. Bankruptcy
Court in White Plains, New York, will fund Arcapita as it tries
to restructure debt after filing for bankruptcy in March.
Wednesday's hearing was delayed two hours as Arcapita, its
creditors and Fortress negotiated over the price of the deal,
Dennis Dunne, a lawyer for Arcapita's creditors' committee, told
the judge.
The loan was originally set at $100 million, but Dunne said
the committee pushed to raise it.
"We thought there was a significant chance the company would
need more" funding, he said.
Lane's approval brings some closure to what has been a
difficult attempt by Arcapita to obtain bankruptcy funding.
In September, the bank sought a $150 million loan from
Silver Point Capital, but creditors balked at its high
commitment fees and terms that would have given Silver Point
broad authority to back out of the deal.
The Fortress agreement, which can be increased to the same
$150 million, lowers commitment fees, allows Arcapita to shop
for better terms from other lenders, and limits the
circumstances under which Fortress can terminate the loan.
Weather also posed an obstacle in finalizing the deal.
Wednesday's hearing had originally been set for Monday, but was
delayed after superstorm Sandy ravaged much of the Eastern
Seaboard.
Arcapita in a court filing last week said it believes the
bankruptcy loan is the first ever to comply with sharia, which
prohibits borrowing money with interest.
The so-called murabahah structure effectively treats the
matter as a sale, incorporating a profit margin and exit fee
instead of interest.
Arcapita, which manages real estate and other investments
that are sharia-compliant, had about $7.4 billion in assets
under management when it filed for Chapter 11. Hedge fund
creditors had been pressuring it in the preceding weeks to pay
back a $1.1 billion loan.
Wednesday's hearing took place in White Plains after being
moved from a Manhattan courthouse that still lacks heat,
Internet service and phone service in the wake of Sandy.
The Manhattan courthouse, which sits near the city's
southernmost tip, could be out of service for "another week or
so," Stephanie Cirkovich, a spokeswoman for the federal court
system in the Southern District of New York, told Reuters on
Wednesday.
The Arcapita bankruptcy is In re Arcapita Bank BSC et al,
U.S. Bankruptcy Court, Southern District of New York, No.
12-11076.
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