Capitol Bancorp to Sell Troubled Sunrise Bank

Capitol Bancorp (CBCRQ) in Lansing, Mich., has reached a tentative agreement to sell its Sunrise Bank of Albuquerque to a group of unnamed investors.

The $1.8 billion-asset company has entered into a letter of intent for the sale and subsequent recapitalization of the $52 million-asset Sunrise, Capitol said Friday. The deal is expected to be completed in 2013.

"As Capitol continues to address challenges within its affiliate network, this transition serves as a strategic opportunity to deleverage our consolidated balance sheet while enabling Sunrise Bank of Albuquerque to partner with a group possessing access to additional capital resources," Joseph D. Reid, Capitol's chairman and chief executive, said in a news release.

Sunrise was significantly undercapitalized at Sept. 30 and the New Mexico state banking regulator told Capitol in September that Sunrise was operating with an unsafe level of capital and said it had the authority to seize it if the problems were not resolved by Dec. 20.

Capitol is currently attempting to go through Chapter 11 restructuring that would force all of its existing stakeholders to take a 53% equity stake and allow for the injection of new equity. But it has had trouble finding an investor to take the remaining 47% stake in exchange for $70 million to $115 million.

In December, ValStone Partners, a private equity firm in Michigan, canceled a planned $50 million investment. Capitol has claimed that the Federal Deposit Insurance Corp. has delayed its restructuring by initially rejecting its request to cover due diligence fees for serious investors. The FDIC later agreed.