BAHRAIN: Security apparatus

Bahrain is to setup an independent ombudsman charged with investigating the conduct and allegations of corruption among the Gulf state’s police force.
The actions of the country’s security apparatus have come under scrutiny amid wide scale civil unrest on the island over the last 12 months.

The new body will be outside of the jurisdiction of the Ministry of Interior and will enforce training standards in Bahrain’s police force, as well as addressing individual complaints about conduct.
On January 30, the Ministry of Interior approved a new code of conduct for the nation’s police, drafted with the help of foreign security consultants, including former Miami police chief John Timoney and London Metropolitan Police Assistant Commissioner John Yates. The new code incorporates the UN Code of Conduct for Law Enforcement Officials and the European Code and adopts a “principles-based” approach to police officers’ duties.

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Bahrain-based private equity investor Arcapita Bank is facing a potentially painful debt workout as it mandates advisers ahead of the March deadline for the Manama-based group to repay $1.1bn of loans.
Privately-held Arcapita, which declined to comment, owns a broad portfolio of companies in the US and Europe, including UK rail cargo company Freightliner, Irish utilities group Viridian and US women’s apparel retailer J

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The sharia-compliant group, which has many wealthy Gulf nationals as shareholders, is in talks with a coordinating committee of lenders, including Royal Bank of Scotland, which last week appointed advisers, including PwC and Clifford Chance. Standard Chartered, an unsecured lender, may also join the committee.

Arcapita, which also has a range of real estate investments in Bahrain and Dubai, has appointed Rothschild, KPMG and Linklaters.
“It’s very early days,” said one adviser. “Banks are looking to see how, and if, repayment can be made by the end of March.”
Analysts are particularly worried about Bahrain-based institutions’ financial health, given the rising cost of borrowing after the pro-democracy uprising damaged confidence.
People close to the process say “encouraging” talks with lenders are focusing on a consensual restructuring effort to extend banks’ maturities, allowing the loan to be repaid over a longer period.
But hedge funds – eyeing the bank’s portfolio of international assets – have been buying small chunks of the debt, considering more aggressive options that would threaten to push the bank towards liquidation.
Arcapita’s loans recently traded at around 60 cents on the dollar in the secondary market, according to one loan trader.
“It’s trading down because people are concerned that they’ve waited a long time, the company hasn’t come up with anything and now we’re getting close to maturity,” said Naji Nabaa, Dubai-based associate director of fixed income sales at Exotix, an investment bank.
Another person aware of the situation said some Arcapita transactions were governed by Cayman Islands law, opening up easier avenues for aggressive legal strategies than would be available within the jurisdiction of Bahrain.
US-based hedge fund Monarch Alternative Capital is suing ship overhaul company Drydocks World in London after the Dubai government-owned entity defaulted on its debts of around $2.2bn.
Arcapita swung back to profit in 2011, reporting net income of $50.2m after a loss of $559m in the previous year, as it made seven exits, including the sale of US coffee chain Caribou.
Excluding the $1.1bn loan maturing on March 28, Arcapita has a further $1.4bn of liabilities as of September 30 2011, according to the company.*
Moves towards a potential loan-restructuring scenario will revive worries about the ability of state-linked and privately owned Gulf companies to refinance bank debt and bonds. Standard & Poor’s, the credit rating agency, has estimated that repayments on bonds alone will amount to $25bn in the Gulf this year.