Colonial Bancgroup requests access to $743,950 of cash collateral

By Alice Popovici

New York, Sept. 18 - Colonial Bancgroup, Inc. filed a motion asking the court to schedule an emergency interim hearing and a final hearing authorizing the company to use cash collateral up to $743,950 and to grant replacement liens, according to a Friday filing with the U.S. Bankruptcy Court fort the Middle District of Alabama.

Colonial Bancgroup said the Federal Deposit Insurance Corp. has placed a hold on its accounts, and it is unable to pay payroll and other business expenses, or proceed with its Chapter 11 cases.

"[Colonial Bancgroup] disputes the legality of the hold placed on the bank accounts by the FDIC-receiver and believes that it is continuing in violation of the automatic stay," the motion states.

"The [company] respectfully submits that both the FDIC-receiver and the Alabama Department of Revenue will be adequately protected by the use of cash collateral in accordance with the budget for the purpose of allowing the [company] to orchestrate an orderly wind down of its business, collection and disposition of its assets, and resolution of claims against it."

As previously reported, Colonial BancGroup filed for Chapter 11 bankruptcy Aug. 25 after the Alabama State Banking Department appointed the Federal Deposit Insurance Corp. as receiver of the company's wholly owned bank subsidiary, Colonial Bank.

The company said Colonial Bank is its primary asset.

According to court documents, Colonial BancGroup had $45 million in total assets and $380 million in total debt as of Aug. 14.

The company's largest unsecured creditors include Bank of New York Trust Co., NA, with a $253.7 million claim for monies received in connection with the issuance of the company's 8 7/8% subordinated notes due 2038 and a $104.09 million claim for monies received in connection with the issuance of its floating-rate junior subordinated interest debentures due 2033.

The unsecured creditors also include U.S. Bank NA of Hartford, with a $5.18 million PCB Capital Trust II claim.

Colonial BancGroup is the Montgomery, Ala.-based holding company for Colonial Bank. Its Chapter 11 case number is 09-32303.

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