Arcapita Bank, a Middle Eastern investment firm with its North American headquarters located in Atlanta, filed for bankruptcy protection on Monday to reorganize its operations and restructure debt.
Arcapita has diverse holdings in industries from retail to soil erosion control to medical device-makers, including several Georgia companies.
The Bahrain-based company said none of its portfolio companies are included in the Chapter 11 filing in U.S. Bankruptcy Court in New York, and the firms will continue to operate unimpeded.
The Chapter 11 filing is not expected to have an immediate impact on operations, including its office in Atlanta. The company filed after it was unable to refinance $1.1 billion in debt due to mature March 28, due in part to the European debt crisis.
Arcapita also started discussions to extend the debt by three years. Arcapita said certain creditors it did not identify prevented the firm from reaching a “consensual resolution” to the debt before it is due.
“This was a difficult decision,” Atif A. Abdulmalik, Arcapita CEO said in a news release. “But after lengthy review of all the alternatives open to us, there is no question that this is the right course of action, which we are taking with the support of the board.”
Dom Mazzone, managing director of Atlanta-based Mazzone & Associates and a mergers and acquisitions expert, said the news was “disappointing,” but there would be little overall impact on the broader capital markets. Much of the private equity investment in Georgia comes from firms outside the state.
But John “Sandy” Smith, a securities attorney with Womble Carlyle Sandridge & Rice, called it “a bombshell,” given Atlanta’s relatively small locally based private equity community.
“There are not a lot of equity firms in Atlanta,” Smith said, calling Arcapita “respected players.”
Arcapita formerly owned Church’s Chicken and counts among its current investments J. Jill, a national women’s apparel company, and British rail company Freightliner. The firm also is a significant investor in Middle Eastern and European real estate.
According to its website, Arcapita is an investor in several metro Atlanta companies, including: CardioMEMS Inc., makers of wireless and implantable medical sensors; Prenova, a firm that helps other companies manage energy use; and Tensar Corp, maker of erosion control and other soil stabilization products.
Arcapita maintains the authority to sell assets, which Abdulmalik said would be carried out at the “appropriate point in the investment cycle.”
The company, which manages approximately $7.4 billion in assets, has in recent years sold its stakes in Church’s Chicken and Caribou Coffee.
Arcapita said it repaid $1.7 billion in debt in the past three years and said it made other moves to buttress its portfolio.
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