Capitol Bancorp to Sell N.M. Unit to Weststar

Capitol Bancorp (CBCRQ) in Lansing, Mich., has moved a step closer to selling a troubled unit in New Mexico.

The $1.8 billion-asset Capitol has entered into a binding sales agreement with Weststar Bancorp for the sale and recapitalization of its $51.5 million-asset Sunrise Bank of Albuquerque, according to a regulatory filing Friday.

In late December Capitol said it had a letter of intent with unnamed buyers to sell the troubled bank.

Capitol named Weststar as the seller in its filing Friday and said the buyer "expects to finalize an escrow arrangement for this transaction ...  before Feb.  8." The deal is scheduled to close this year.

Weststar is applying to become a bank holding company through the acquisition of Sunrise, the Federal Reserve said in a Jan. 26 publication.

New Mexico's bank regulator in September ordered Sunrise to recapitalize itself by Dec. 20 of last year, noting  that it has the power to seize the bank if its problems are not corrected.

A failure of any of Capitol's dozen banks, most of which are significantly undercapitalized, could be disastrous to all of them given the Federal Deposit Insurance Corp.'s authority to assess the cost of failure of related survivors.

Meanwhile, Capitol has been trying to find outside capital to fix the organization. It is currently pursuing it through bankruptcy. The plan is to give all stockholders in the company a common equity a 53% stake in the company while selling the remainder to a new investor.