Colonial BancGroup Inc. is seeking to keep sole control of its bankruptcy case while it battles with the Federal Deposit Insurance Corp. over the agency's $1 billion claim against the bank holding company.
Colonial BancGroup, the parent of Colonial Bank until banking regulators seized it last year, wants a three-month extension, through Nov. 18, of its exclusive right to file a plan detailing how it intends to liquidate its remaining assets to pay back its creditors.
In papers filed Friday in U.S. Bankruptcy Court in Montgomery, Ala., the holding company said it is "not in the best interests of the estate" to file such a plan as long as its legal dispute with the FDIC is pending before the court.
The FDIC was appointed receiver of the estate of Colonial's bank upon its collapse last August, after which Colonial filed for Chapter 11 bankruptcy protection and regulators sold substantially all of the bank's assets to BB&T Corp. The FDIC says Colonial owes it about $1 billion, which represents the gap between the amount of capital its banking subsidiary was required to have and the amount it actually had when the bank was seized.
Colonial disputed the FDIC's claim and, in turn, sued the regulator to recoup nearly $900 million in funds it transferred to the bank in the months before the collapse to shore up the bank's capital. According to Colonial, banking regulators encouraged the transfer of the funds while they knew or should have known that the troubled bank was likely to be seized.