Colonial BancGroup Inc., the former parent of failed thrift Colonial Bank, is seeking bankruptcy court permission to begin pitching its debt-payment plan to its creditors.
The Montgomery, Ala., company asked the bankruptcy court there to consider approving an outline of its Chapter 11 plan, called a disclosure statement, at a Jan. 26, 2011, hearing. The court must sign off on the outline before Colonial may begin soliciting its creditors' support for the plan.
Colonial is further urging the court to consider approving the Chapter 11 plan itself at a March 18 hearing, a timeline it says is not only appropriate but vital to its ability to conclude its bankruptcy liquidation quickly.
"It will allow the debtor to resolve its Chapter 11 case expeditiously, thereby minimizing costs and maximizing value for the benefit of all creditors," Colonial said Wednesday in court papers.
Colonial's Chapter 11 plan, which the former bank-holding company filed last week, describes how it will pay its creditors by tapping such assets as $36 million in bank account deposits, potential tax refunds of more than $252 million, insurance policies, potential lawsuit proceeds and real estate.
Colonial's ownership of some of these assets, however, is subject to dispute with such parties as the Federal Deposit Insurance Corp., which was appointed receiver of Colonial's bank upon its failure last year.
Colonial said it expects efforts to resolve these disputes to continue through at least next year.
In the meantime, Colonial is pressing forward with its plan to address the approximately $380 million in liabilities it reported in its bankruptcy petition. Under the payment plan, secured creditors will receive cash or the collateral securing their claims, while unsecured creditors will share in any funds that remain after secured creditors have been paid in full.
Colonial's current equity holders will see their interests canceled, and Colonial said it doesn't anticipate that there'll be enough funds leftover to pay them. The bankruptcy law's priority scale of claims ranks equity holders at the bottom.
Colonial sought Chapter 11 protection on Aug. 25, 2009, nearly two weeks after its Colonial Bank subsidiary failed. Upon its collapse, the biggest bank failure of 2009, the bank's operations and deposits were sold to Branch Banking & Trust Co.