Capitol Bancorp settles committee plan issues, closes bank share sale

By Caroline Salls

Pittsburgh, Jan. 7 - Capitol Bancorp Ltd. and its official committee of unsecured creditors entered into a settlement intended to resolve the committee's objections to the company's amended joint liquidating plan and amended disclosure statement, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

A hearing is scheduled for Jan. 21 before the U.S. Bankruptcy Court for the Eastern District of Michigan for approval of the settlement motion, the possible confirmation of the plan and the possible final approval of the disclosure statement.

According to court documents, the settlement makes amendments to the plan related to the composition of a liquidating trust oversight committee, funding of a liquidation trust, payment of fees and expenses, debtor releases and indemnification and exculpation and limitation of liability.

On the plan effective date, Capitol Bancorp will contribute to the trust a share of the proceeds from the sale of its common stock in four subsidiary banks, all causes of action and a $446,008 loan secured by real property in Lansing, Mich.

The company will also contribute all other assets, except cash on hand in excess of the proceeds of the share sale, up to a maximum of $1.5 million, furniture, fixtures and equipment, an indirect ownership interest in Summit Bank of Kansas City and other assets required for operation during a wind-down period.

Once the sum of the cash on hand as of Jan. 21 plus cumulative cash receipts during the period of the wind-down budget, with specified exceptions, exceeds $1.5 million, the debtors will pay an excess amount to the trust no later than the 15th day of each month following the month in which the proceeds are received.

The proposed plan changes also give the liquidation trustee the right to veto any option that allows the company to toggle to reorganization.

The committee agreed under the settlement to support the company's plan and to withdraw plan objections, a chief restructuring officer appointment motion and specified appeals.

Share sale closes

Capitol Bancorp said in the 8-K that the sale of its shares of common stock in subsidiaries Michigan Commerce Bank, Indiana Community Bank, Bank of Las Vegas and Sunrise Bank of Albuquerque to Talmer Bancorp, Inc. closed on Jan. 1.

In addition to the stock in the surviving banks, Talmer also purchased all bank-related contracts, all rights, titles and interest to any proceeds received or to be received after Dec. 31, 2012 related to any contract, all of the trademarks and service marks registered to Capitol and specified other assets.

The sale price was $4 million. Talmer also agreed to make a $90 million equity contribution into the surviving bank at closing, to pay $2.5 million of post-bankruptcy administrative fees and expenses, and, in connection with any contract or agreement to which Capitol is a party, to pay the amount required cure all monetary defaults.

Immediately before the sale closing, the other three banks were merged with and into Michigan Commerce Bank, the 8-K said.

Capitol, a Lansing, Mich.-based community banking company, filed for bankruptcy on Aug. 9, 2012. Its Chapter 11 case number is 12-58409.

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