Bancorporation of Texas, a federal bankruptcy court in Dallas has finally approved its plan to emerge from Chapter 11. First City said last week that Judge Harold Abramson had agreed to let it merge with J-Hawk Corp., a Waco, Tex.-based financial services firm specializing in acquiring and selling distressed assets. In exchange, First City would transfer to J-Hawk 49.9% of its common stock and retain nearly $650 million in net operating loss carryforwards. "We're real happy to get out of bankruptcy and real excited to get back into business," said Robert Brown, First City's president and chief operating officer. "We'll be out of the banking business, but we'll still be in the financial world." The judge's confirmation is expected to be filed this week. Opponents will have the 10 days following to appeal. Consummation is expected 15 days later. At that time, the Federal Deposit Insurance Corp. is expected to return to First City $125 million in cash and $55 million in loans and real estate assets. The plan also calls for the settlement of a $3 billion lawsuit that First City filed against the FDIC for seizing its assets prematurely. The FDIC has denied any wrongdoing. Under the settlement, the FDIC would return about $75 million in cash reserves held against a pool of about $150 million in distressed loans now with Texas Commerce Bank of Houston and Frost National Bank of San Antonio. In return, First City will buy the distressed loans from Texas Commerce and Frost at face value. The settlement will also allow First City to pay its depositors and creditors in cash. Likewise, the company intends to pay off senior preferred shareholders over two years. Junior preferred shareholders will get between $100 million and $150 million in cash over three years, depending on the liquidation value of the returned assets, as well as 35% of the new company's common stock. Current common shareholders will get the remaining 15%. "The approval of the plan will result in the full recovery for our depositors and creditors and the substantial return of our equity interest, and it will see First City emerge as a going concern operating under the name FirstCity Financial Corp.," said C. Ivan Wilson, First City's chairman.
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