Arcapita rises out of Chapter 11 bankruptcy

By Marc Castro

Sep 18, 2013 08:56 AM EDT

Arcapita, the Islamic investment firm based out of Bahrain, had announced its emergence from US bankruptcy under Chapter 11 rules. This is the seminal case to determine how Islamic finance is viewed and seen in courts of the Western World.

The bankruptcy plan for Arcapita became effective last Tuesday, required the transfer of its assets to a new holdings company. This holdings company would in turn dispose them and the proceeds would be used to pay off creditors and ultimately, effect a wind down of the firm's business.

According to an Arcapita spokesperson in a statement to Reuters, "We expect to have a complete exit of the portfolio over the next four to five years. Exits so far have been better than expected andd the reorganization plan allows exactly just that in order to maximize values."

Islamic finance complies wth religious tenets that bans interest and gambling. Islamic law though is not codified in a formal document and this has caused many Western courts to struggle on the formalities as well as efficacy of these kinds of contracts.

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