ATLANTA – Six Georgia banks last week filed suit against the FDIC to prevent the federal regulator from selling a loan it seized from failed Silverton Bank in which they own participation interests, for development of a W Hotel in downtown Atlanta.
The lawsuit claims that Silverton, which collapsed in May, mismanaged the loan for the 237-room W Hotel and condominium project and failed to tell participating banks about problems with the loan, which fell into default a year ago.
The FDIC sale may encourage a buyer to seek short-term profit or a foreclosure, which would force the banks to take writedowns on the portions of the loan that they hold, according to the suit.
The suit seeks a temporary restraining order preventing the FDIC from selling both the loan and the servicing rights together. Those servicing rights, which allow the owner to decide how to manage the default and whether the loan should be foreclosed, should be transferred to the other banks that bought participations in the loan, according to the lawsuit.
Specialty Finance Group, a Silverton unit, loaned about $80 million in April 2008 for development of the hotel and condominium project, called 45 Allen Plaza. The unit retained $23 million of the loan and sold the rest to a group of 25 banks.
Some of those banks objected to the way the FDIC was planning on selling the loan, part of a $416 million package of Silverton assets being auctioned. The banks said that the W Hotel project, owned by Atlanta-based Barry Real Estate Cos., could be rescued with a long-term workout.
