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Capitol Bancorp in Lansing, Mich., is asking its debt holders to convert their interests to equity in what appears to be a last-ditch bid to avoid bankruptcy.
June 25 -
The Lansing, Mich., company has turned its inventory of community banks into a garage sale to bring in capital to support its struggling banks. With fewer banks left to sell, industry observers say Capitol has few options to keep capital levels above regulatory minimums for failure.
April 6 -
Two weeks after striking a deal to buy Capitol Bancorp's Seattle unit, AmericanWest is moving into the California market with a deal for Capitol's Sunrise Bank in San Diego.
June 9 -
Investors have recapitalized several banks, most notably those in the western U.S., in recent months with the intention of salvaging their franchises and creating vehicles that can be used to buy other banks.
May 27 -
Rarely is bankruptcy court a welcome detour, but more struggling banks may take it to overcome debtholders blocking their recapitalization efforts.
January 5
Capitol Bancorp (CRBC) has spent the last three and a half years
The $1.9 billion-asset company announced late Thursday that it has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Eastern District of Michigan. Capitol had disclosed in June that it was
The preferred option involved asking holders of its $158.3 million of debt to exchange those holdings for equity. The Lansing, Mich., company said that the offer expired July 27 and that it was unable to get the minimum number of debtholders to convert.
The second option involved putting the holding company into bankruptcy, where a court would convert all stakeholder interests into equity. Capitol said in its release Thursday that its stakeholders "overwhelmingly voted to accept" the bankruptcy plan.
Through bankruptcy, existing stakeholders, which includes the trust-preferred securities holders, would be left with 53% control of the company. Capitol is searching for new investors to infuse the company with $70 million to $115 million in exchange for the remaining 47%. Capitol's release Thursday did not identify any potential investors. The company declined to comment beyond the regulatory filings.
Bank holding company bankruptcies
In fact, Capitol and a reinvigorated AmericanWest
As it pursues bankruptcy, Capitol is continuing to sell banks to bring in capital to prop up several of its significantly undercapitalized banks. The company announced on July 31 that it had sold its interest in the $90 million-asset Bank of Michigan and the $76 million-asset First Carolina State Bank. It said Thursday it also has pending sale on a bank in the Northwest.
Capitol on Thursday reported a second-quarter loss of $10.3 million, narrowing its loss by 37% from a year earlier. The loan-loss provision was $294,000, compared to $5.7 million a year earlier.
