Friday, October 22, 2010

More on Awal Bank Chapter 11 Filing

Updated for comments on Chapter 11.

Here are some additional details on Awal's filing.
  1. The case number assigned by the Bankruptcy Court of the Southern District of Manhattan is 10-15518-alg.  Awal's previous Chapter 15 filing has case number 09-15923alg.
  2. As indicated by the "alg" at the end of the case number, Justice Allan L. Gropper has been assigned this case.
  3. The Bank is being represented by Brown Rudnick LLP who filed the Voluntary Petition for Bankruptcy under Chapter 11.
  4. The filing was authorized by Awal's Administrator, Charles Russell, LLP.  Presumably before proceeding CR obtained the no objection of the Central Bank of Bahrain who appointed them.  I think this is a pretty strong indication that the CBB has decided to proceed with the liquidation of the Bank.  Note:  A Chapter 11 proceeding is of course a reorganization not a liquidation.  The latter is Chapter 7.  Chapter 11 allows the debtor to propose a plan for dealing with its existing obligations - either payment in full, in part, conversion to equity, etc.  Post implementation the debtor continues as a going entity (e.g., Continental Airlines).  So what I mean here is that the CBB has decided to proceed knowing it will cause the lenders some pain.  That in turn means the situation is beyond repair.  And that the Bahraini authorities have decided to "bite the bullet" and take the reputational damage that will come from such action. 
As part of its filing, Awal Bank made the following statements:
  1. After the payment of various expenses including that of administration, there will be no funds available for distribution to unsecured creditors.
  2. Estimated creditors are between 50 and 99. 
  3. US assets are above US$50 million up to and including US$100 million.
  4. Estimated debts (worldwide) are over US $1 billion.  (This is the largest amount provided on the Bankruptcy Filing Form).
As required on the Filing Form, the debtor lists its top twenty unsecured creditors.  No amounts are provided though.
Here they are in the order of appearance on the Form:
  1. Abu Dhabi Commercial Bank, Abu Dhabi
  2. Abu Dhabi Islamic Bank, Abu Dhabi
  3. AlGosaibi Money Exchange, Saudi Arabia
  4. Bank of Montreal, Canada
  5. Bayerische Hypo-und Vereinsbank, United Kingdom (London Branch)
  6. Bayerische Landesbank/Bayern LB Germany
  7. Boubyan Bank, Kuwait
  8. Calyon Corporate and Investment Bank, United Kingdom
  9. Commercial Bank of Kuwait, Kuwait
  10. Commercial Bank of Qatar, Qatar
  11. Commerzbank Global Equities AG (formerly Dresdner Bank) Germany
  12. Commonwealth Bank of Australia, United Kingdom (London Branch)
  13. Fortis Bank, Belgium
  14. Gulf International Bank, Bahrain
  15. HSBC, Australia
  16. HSBC, United States (NY Branch)
  17. HSH Nordbank AG, German
  18. JP Morgan, United Kingdom (London Branch)
  19. Kuwait Finance House (Liquidity Management House), Kuwait
  20. The International Banking Corporation, Bahrain
If you're wondering about TIBC (which also filed under Chapter 15 in 2009) taking a similar action, a  court hearing is scheduled under their case next week Tuesday (26 October).  Stay tuned.

    3 comments:

    Laocowboy2 said...

    Given the situation, the Central Bank of Bahrain is doing the right thing in "biting the bullet". If only the same applied further north with the Investment Company sector. Rather than causing reputational damage, I would expect it to reinforce the CBB's reputation as a regulatory authority.

    Abu 'Arqala said...

    LC2

    Logically it should get credit.

    But when faced with a loss, a "good" banker looks for a scapegoat. As well as furiously for a post facto guarantor.

    The central bank gets blamed for (a) not forcing the failed institution to cease its dangerous practices before it failed and (b) for not bailing out the banks for their poor credit decision.

    laocowboy2 said...

    I rather feel the auditors were more at fault than the Central Bank guys - inspections by the latter depend on the external auditors (a) doing their own ob and (b) alsomaking sure internal audit controls are robust. neither applied in this case.