Colonial BancGroup Inc. is seeking more time to control its bankruptcy as it works to resolve ownership disputes over the assets of its failed banking subsidiary.
Colonial wants a two-month extension of the time in which it alone can file the plan detailing how it will liquidate its assets and distribute the proceeds to creditors, arguing that there's no point in filing such a plan as long as it and its creditors stake competing claims on the assets of the defunct Colonial Bank.
"Despite the debtor's progress in this Chapter 11 case, significant unresolved issues and contingencies remain impediments to the debtor's ability to propose any plan of liquidation," Colonial said Friday in court papers.
The FDIC was appointed receiver of the estate of Colonial's Montgomery, Ala., bank upon its collapse last August, after which Colonial filed for Chapter 11 bankruptcy protection and the Federal Deposit Insurance Corp. sold substantially all of the bank's assets to BB&T Corp.
Since the sale, Colonial has battled the FDIC and BB&T, as well as Alabama state taxing authorities, over the ownership of various assets.
The FDIC, for example, says Colonial owes it more than $1 billion, which represents the gap between the amount of capital the bank was required to have and the amount it actually had when the bank was seized.
Colonial has not only objected to the FDIC's demand but also has fired back with a lawsuit demanding to recoup nearly $900 million in funds it transferred to the bank in the months before the collapse in order to shore up the bank's capital. According to Colonial, banking regulators encouraged the transfer of these funds while they knew or should have known that the troubled bank was likely to be seized.
While Colonial waits for a bankruptcy court ruling on these disputes, it's asking the court to extend its exclusive plan-filing rights through Aug. 20. They're currently slated to expire June 18.
The U.S. Bankruptcy Court in Montgomery will consider Colonial's request at a June 14 hearing.
