Capitol Bancorp Settlement Approval Sought, Shortened Timeline Approved


Capitol Bancorp and Financial Commerce filed with the U.S. Bankruptcy Court a motion, pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure, seeking entry of an order authorizing a proposed settlement with the Federal Deposit Insurance Corporation (FDIC) regarding the waiver of the cross-guaranty liability alleged by the FDIC against the Debtors’ banks. The motion explains, “First and foremost, the Settlement will result in the waiver of the Cross-Guaranty Liability with respect to the sales of the Banks, thus facilitating those sales consistent with the Plan. Moreover, pursuant to the Settlement, 15 percent of the proceeds from each sale will go to the Debtors’ estates for distribution in accordance with the Plan (or, if the Plan is not confirmed, the Bankruptcy Code and applicable law). Because the FDIC contends that it has no obligation to waive the Cross-Guaranty Liability or share any portion of the net proceeds of the sales of the Banks with the Debtors’ estates, 15 percent of such proceeds is considerably beneficial to the estates. Indeed, it is reasonably believed that, without the Settlement, and the corresponding prompt waiver of Cross-Guaranty Liability, the pending purchaser of the Remaining Banks will exercise its contractual right to terminate the sale transaction, and the Debtors will almost certainly be unable to locate an alternate purchaser. Additionally, a failure to enter into the Settlement would delay the administration of the Debtors’ estates at a time when the Debtors are attempting to proceed expeditiously toward confirmation of the Plan. A sale of the Banks – and retaining a portion of the proceeds there from – is a critical component of the Plan, and without such sales, not only is the Plan process likely to be delayed or derailed, but the Debtors would incur additional ongoing related professional fees and costs. This added complexity, inconvenience, delay and expense associated with a failure to consummate the Bank sales weighs heavily in favor of the Settlement.” The Court subsequently approved the Company’s ex-parte motion to shorten time on this consideration and scheduled a November 12, 2013 hearing to consider the settlement.

More on Capitol Bancorp Ltd.

Leave a Reply

Your email address will not be published.