Insurers' Suit Puts Pressure on Citytrust
Five insurance companies holding $16 million in senior debt of Citytrust Bancorp have filed a petition seeking to force it into bankruptcy court.
The petition, under Chapter 7 of the bankruptcy law, could force liquidation. The insurers are demanding $770,000 in overdue interest payments and principal repayment immediately, said Jonathan K. Dodge, a lawyer in the New York office of Andrews & Kurth who represents the bondholders.
Complicating the Bidding
The move may hamper the government-assisted sale of the principal unit of Citytrust, which is a $2 billion-asset bank based in Bridgeport, Conn. The Federal Deposit Insurance Corp. began soliciting bids for the insolvent bank in June but has not seized control. Bondholders may seek to wrest money out of the bank subsidiary.
Mr. Dodge said the bankruptcy petition was filed after a pact with bondholders failed to win regulatory approval.
At least 10 companies have expressed interest in buying Citytrust, which is being sold in combination with Mechanics and Farmers Savings Bank of Bridgeport. Combined, the banks have $3.5 billion in assets. The government expects to announce a buyer in early September.