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Arcapita Bankruptcy Was Forced by Hedge Funds, Lawyer Says

BusinessWeek – Arcapita Bank BSC, a manager of Islamic-compliant investments with $7 billion under management, was forced into bankruptcy by hedge funds that sought to be repaid in full, a lawyer for Arcapita said.

Restructuring talks on the company’s $1.1 billion loan due in March “were derailed when several hedge funds who bought that debt on the secondary market at a discount threatened an involuntary bankruptcy if they didn’t receive par” on their investments, attorney Michael Rosenthal told U.S. Bankruptcy Judge Sean Lane in Manhattan today. One of the hedge funds is Euroville Sarl, he said.

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