Colonial BancGroup's plan closer to confirmation; no case conversion

By Lisa Kerner

Charlotte, N.C., May 31 - Colonial BancGroup, Inc.'s plan of reorganization may be confirmed on Wednesday if it is further amended to correct three perceived deficiencies identified by the judge, according to an attorney familiar with the case following a hearing on Tuesday in the U.S. Bankruptcy Court for the Middle District of Alabama.

Also on Tuesday, the court denied a motion by the Federal Deposit Insurance Corp. to convert Colonial BancGroup's cases to a Chapter 7 liquidation from a Chapter 11 bankruptcy, the attorney said.

The FDIC filed the motion as the receiver for Colonial Bank.

As previously reported, the court had denied confirmation of Colonial BancGroup's reorganization plan last week because it did not meet the best interest of creditors test under the Bankruptcy Code.

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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