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Colonial BancGroup fixes plan issues, asks court to reconsider denial
By Caroline Salls
Pittsburgh, May 24 - Colonial BancGroup, Inc. is asking the court to reconsider its order denying confirmation of the company's plan after Colonial made a new round of changes to the plan, according to a Monday filing with the U.S. Bankruptcy Court for the Middle District of Alabama.
As previously reported, the court denied confirmation of the plan on Friday because it did not meet the best interest of creditors test under the Bankruptcy Code.
The company said Monday that the plan was rejected specifically because the terms of the plan trustee's compensation potentially exceeded the compensation of a Chapter 7 trustee and because of the plan committee's authority to prosecute designated causes of action at the expense of Colonial BancGroup's estate.
Under the proposed amendments to the plan, the company said it has eliminated these obstacles to confirmation.
Colonial said the plan trustee's compensation is now on equal footing with a Chapter 7 trustee, meaning it is limited to reasonable compensation as approved by the court and subject to the limits imposed by the Bankruptcy Code.
In addition, the plan committee is now only authorized to file a designated cause of action if approved by a court order based upon a showing that the action is in the best interest of the estate.
According to the reconsideration motion, the proposed changes do not "adversely change the treatment of the claim of any creditor or the interest of any equity security holder."
Colonial BancGroup is the Montgomery, Ala.-based holding company for Colonial Bank. The company filed for bankruptcy on Aug. 25, 2009. Its Chapter 11 case number is 09-32303.
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