Frequently Asked Questions
- What is Chapter 11?
- Why is Arcapita filing for a Chapter 11 plan of reorganization?
- What happens during a Chapter 11 process?
- How long will Arcapita be in the Chapter 11 process?
- What does "going into" and "coming out of" Chapter 11 mean?
- Where can I get a copy of the petitions and other documents?
- Where can I get more information?
Chapter 11 protects value for all stakeholders and provides more options for management. It is the portion of the U.S. Bankruptcy Code that allows corporations to reorganize under the protection of the U.S. Bankruptcy Court. A unique feature of Chapter 11 is that it allows Arcapita and its filing subsidiaries to continue to operate their business and manage their property during the Chapter 11 process, and expenses incurred during the case are accorded priority payment status. Because Chapter 11 allows Arcapita to continue to operate during the Chapter 11 process, Arcapita will be in a much better position to realize the true value of its investments over a reasonable time frame, rather than being forced to sell them over a short time horizon. The Chapter 11 filing triggers an "automatic stay," which essentially freezes all of the company's debts and obligations to its creditors and any attempts to collect on those obligations as of the bankruptcy filing date. The "automatic stay" also prevents all lawsuits against the company from moving forward. All legal claims are resolved through the Chapter 11 process.
Chapter 11 protects value for all stakeholders and provides more options for management. Arcapita has a $1.1 billion facility which falls due on March 28th 2012. We began preparations for the refinancing of this facility 18 months ago. Until the Eurozone crisis erupted in July 2011, we were on track to pay it back in a process that would pay down a portion of the facility with cash raised through disposals, and use a new facility to refinance the balance. However, as a result of the rekindling of the economic crisis, this process faltered, and our options for repayment became limited. A month ago, we engaged with the 50 participants in the $1.1 billion facility and committed to a consensual process that would agree terms with the existing participants to extend the maturity. In recent days, however, the actions of a small group of non-bank creditors have precluded Arcapita from reaching such a consensual resolution before the March 28th maturity date, jeopardizing Arcapita's ability to satisfy its fiduciary duties to its stakeholders. The Chapter 11 filing offers Arcapita the protection it needs from actions threatened by a handful of creditors that would substantially impair value to the detriment of Arcapita's other stakeholders. The Chapter 11 filing will allow Arcapita to complete orderly negotiations with all parties.
Chapter 11 is a tool used by companies to restructure debt and position their businesses for long term success. This process generally allows a filing entity to continue operating as usual while working with creditors to develop a plan of reorganization that provides for the restructuring of their obligations and the continuation of the company on a going forward basis. Employees should continue to receive their paychecks and benefits in the same manner as before the filing. When the plan of reorganization is negotiated, it will be presented to the Court for approval and, upon such approval, the company will be emerge from Chapter 11 and continue to conduct business as a strong and financially viable company.
Under the process, Arcapita, with input from its creditors, will develop a plan of reorganization. Creditors will vote on the plan and the Court will hold a hearing to approve it. Once this occurs, Arcapita will be able to emerge from Chapter 11. We are working to reach an agreement with creditors as soon as possible. The length of time this takes depends entirely on the progress of the negotiations, but typically, it would take between 6 and 12 months. We will do our best to keep our employees, investors, creditors and other interested parties updated on significant developments as they occur.
"Going into" means documents have been filed with the Court to request protection under the United States Bankruptcy Code. Following the filing of those papers, the organization is operating "in" or "under" Chapter 11 and is able to take advantage of certain provisions in the law. When the plan of reorganization is completed and approved by creditors, it is "confirmed" by the Court and the organization "comes out" "exits" or "emerges" from Chapter 11 as a reorganized entity.
The lead case number is 12-11076 and the Judge is the Honorable Sean H. Lane. Copies of the Chapter 11 petitions and other documents filed with the Court will be available shortly after the filing at www.gcginc.com/cases/arcapita. The petitions are also accessible at the Court's Internet site, http://www.deb.uscourts.gov/, through an account obtained from Pacer Service Center at 1.800.676.6856.
Arcapita has set up a special information page on the following web site: www.gcginc.com/cases/arcapita, which contains a variety of information on our Chapter 11 cases.