On May 17, 2013, the US Bankruptcy Court for the Southern District of New York, in In re Arcapita Bank B.S.C., issued an order approving a Sharia-compliant exit financing facility. The $350 million loan, provided by Goldman Sachs to Arcapita Bank, is structured as a murabaha. In a murabaha, one of the most common Islamic finance structures, the loan is structured as a sale by the lender of an asset where the borrower pays the purchase price of the asset plus a profit element over time (see Checklist, Islamic Finance Deal Structure: Murabaha). This cost plus arrangement gives the lender the return it requires while complying with the Islamic prohibition against interest.

Goldman Sachs prevailed over rival lender Fortress Investment Group LLC to provide the exit financing facility. In December, Fortress provided a $125 million DIP financing facility to Arcapita Bank that was believed to be the first Sharia-compliant DIP loan approved by a US bankruptcy court (see Legal Update, First Sharia-compliant DIP Financing Approved: Arcapita Bank).

The hearing to confirm Arcapita Bank's proposed plan to exit bankruptcy is scheduled for June 11, 2013.

To learn more about Sharia-compliant financing, see Practice Notes, Islamic Finance: US Law Overview and Islamic Syndicated Financing: An Underdeveloped Method of Sharia Compliant Financing.