Anchor BanCorp Wisconsin (ACBW) in Madison has filed for bankruptcy in a bid to restructure its debt and recapitalize its struggling bank.

The $2.3 billion-asset company has filed a plan for Chapter 11 reorganization that would allow it to repay $183 million in outstanding debt at a 73% discount. The plan also would free it from having to repay $139 million of Troubled Asset Relief Program aid, Anchor announced Tuesday.

Moreover, Anchor would sell $175 million in common stock to institutional and private investors to fund the reorganization and to recapitalize its bank subsidiary, it said.

Anchor's creditors, including the Treasury Department, have agreed to the plan of reorganization, the company said. Under the plan, the Treasury's Tarp shares would be converted to common shares representing an ownership stake of 3.3% in the company, while the new equity investors would hold a cumulative stake of 96.7%. No single investor would own more than 9.9% of the common equity.

Anchor's banking unit, AnchorBank, would not be included in the bankruptcy and would continue normal operations, the company said.

Last month, Anchor defaulted on $176 million in debt to a group of lenders led by U.S. Bancorp (USB) after the Federal Reserve Board rejected Anchor's request to extend the loan. Anchor is operating under a cease-and-desist order that requires it to get the Fed's approval to take on debt.

As a result of the default, Anchor's interest cost on the debt shot up by 2 percentage points, to 19%.

"This is an important and necessary step in the transformation and turnaround of the bank," Chris Bauer, AnchorBank president and chief executive, said in a news release announcing the Chapter11 filing. "Upon completion of this transaction, AnchorBank will have capital in excess of levels required by our regulators. This will position the bank for a return to profitability and growth."

AnchorBank lost $9.3 million in the first quarter of 2013, and lost $9.6 million in 2012, according to the Federal Deposit Insurance Corp. It has not announced its earnings for the second quarter of 2013. It held Tier 1 capital of 4.57% and total risk-based capital of 9.21% as of March 31, according to the FDIC.

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