-
UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF
ALABAMA
NORTHERN DIVISION
--------------------------------------------------------x : In re :
Chapter 11 : THE COLONIAL BANCGROUP, INC., : Case No. 09-32303
(DHW) : Debtor. : :
--------------------------------------------------------x
THIRD AMENDED DISCLOSURE STATEMENT ACCOMPANYING SECOND AMENDED
CHAPTER 11 PLAN OF
LIQUIDATION OF THE COLONIAL BANCGROUP, INC.
PARKER HUDSON RAINER & DOBBS LLP C. Edward Dobbs, Esq.
Rufus T. Dorsey, IV, Esq. J. David Freedman, Esq.
285 Peachtree Center Avenue, Suite 1500 Atlanta, GA 30303
(404) 523-5300
Attorneys for The Colonial BancGroup, Inc.
Dated: February 23, 2011 Montgomery, Alabama
1814056_3
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THIS DISCLOSURE STATEMENT HAS BEEN PREPARED PURSUANT TO SECTION
1125 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 3016(b) AND IS NOT
NECESSARILY IN ACCORDANCE WITH THE FEDERAL OR STATE SECURITIES LAWS
OR SIMILAR LAWS. THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF
CERTAIN PROVISIONS OF THE PLAN AND CERTAIN OTHER DOCUMENTS AND
FINANCIAL INFORMATION. THE INFORMATION CONTAINED IN THIS DISCLOSURE
STATEMENT IS PROVIDED FOR THE PURPOSE OF SOLICITING ACCEPTANCES OF
THE PLAN AND SHOULD NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN
TO DETERMINE WHETHER AND HOW TO VOTE ON THE PLAN. THE DEBTOR
BELIEVES THAT THESE SUMMARIES ARE FAIR AND ACCURATE. THE SUMMARIES
OF THE FINANCIAL INFORMATION AND THE DOCUMENTS THAT ARE ATTACHED
TO, OR INCORPORATED BY REFERENCE INTO, THIS DISCLOSURE STATEMENT
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH INFORMATION
AND DOCUMENTS. IN THE EVENT OF ANY INCONSISTENCY OR DISCREPANCY
BETWEEN A DESCRIPTION IN THIS DISCLOSURE STATEMENT AND THE TERMS
AND PROVISIONS OF THE PLAN, OR THE OTHER DOCUMENTS AND FINANCIAL
INFORMATION INCORPORATED IN THIS DISCLOSURE STATEMENT BY REFERENCE,
THE PLAN OR THE OTHER DOCUMENTS AND FINANCIAL INFORMATION, AS THE
CASE MAY BE, SHALL GOVERN FOR ALL PURPOSES.
THE STATEMENTS AND FINANCIAL INFORMATION CONTAINED IN THIS
DISCLOSURE STATEMENT HAVE BEEN MADE AS OF THE DATE OF THIS
DISCLOSURE STATEMENT UNLESS OTHERWISE SPECIFIED. HOLDERS OF CLAIMS
AND EQUITY INTERESTS REVIEWING THIS DISCLOSURE STATEMENT SHOULD NOT
INFER AT THE TIME OF SUCH REVIEW THAT THERE HAVE BEEN NO CHANGES IN
THE FACTS SET FORTH IN THIS DISCLOSURE STATEMENT SINCE THE DATE OF
THIS DISCLOSURE STATEMENT. EACH HOLDER OF A CLAIM OR INTEREST
ENTITLED TO VOTE ON THE PLAN SHOULD CAREFULLY REVIEW THE PLAN AND
THIS DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE CASTING A
BALLOT. THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE LEGAL,
BUSINESS, FINANCIAL, OR TAX ADVICE. ANY ENTITIES DESIRING ANY SUCH
ADVICE OR ANY OTHER ADVICE SHOULD CONSULT WITH THEIR OWN
ADVISORS.
NO ONE IS AUTHORIZED TO GIVE ANY INFORMATION WITH RESPECT TO THE
PLAN OTHER THAN THAT WHICH IS CONTAINED IN THIS DISCLOSURE
STATEMENT. NO REPRESENTATIONS CONCERNING THE DEBTOR OR THE VALUE OF
ITS PROPERTY HAVE BEEN AUTHORIZED BY THE DEBTOR OTHER THAN AS SET
FORTH IN THIS DISCLOSURE STATEMENT AND THE DOCUMENTS ATTACHED TO
THIS DISCLOSURE STATEMENT. ANY INFORMATION, REPRESENTATIONS, OR
INDUCEMENTS MADE TO OBTAIN AN ACCEPTANCE OF THE PLAN THAT ARE OTHER
THAN AS SET FORTH, OR INCONSISTENT WITH, THE INFORMATION CONTAINED
IN THIS DISCLOSURE STATEMENT, THE DOCUMENTS ATTACHED TO THIS
DISCLOSURE STATEMENT OR THE PLAN SHOULD NOT BE RELIED UPON BY ANY
HOLDER OF A CLAIM OR EQUITY INTEREST.
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WITH RESPECT TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND
OTHER PENDING, THREATENED, OR POTENTIAL LITIGATION OR OTHER
ACTIONS, THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE, AND MAY NOT
BE CONSTRUED AS, AN ADMISSION OF FACT, LIABILITY, STIPULATION, OR
WAIVER, BUT RATHER AS A STATEMENT MADE IN THE CONTEXT OF SETTLEMENT
NEGOTIATIONS PURSUANT TO RULE 408 OF THE FEDERAL RULES OF
EVIDENCE.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED
BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, NOR HAS
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED IN THIS
DISCLOSURE STATEMENT OR UPON THE MERITS OF THE PLAN.
ALTHOUGH THE DEBTOR BELIEVES THAT THE PLAN COMPLIES WITH ALL
APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE, THE DEBTOR CANNOT
ASSURE SUCH COMPLIANCE OR THAT THE BANKRUPTCY COURT WILL CONFIRM
THE PLAN.
ALTHOUGH THE DEBTOR HAS USED ITS BEST EFFORTS TO ENSURE THE
ACCURACY OF THE FINANCIAL INFORMATION PROVIDED IN THIS DISCLOSURE
STATEMENT, THE FINANCIAL INFORMATION CONTAINED IN OR INCORPORATED
BY REFERENCE INTO THIS DISCLOSURE STATEMENT HAS NOT BEEN AUDITED,
EXCEPT AS SPECIFICALLY INDICATED OTHERWISE. PLEASE REFER TO CHAPTER
XII OF THIS DISCLOSURE STATEMENT, ENTITLED "RISK FACTORS" FOR A
DISCUSSION OF CERTAIN CONSIDERATIONS IN CONNECTION WITH A DECISION
BY A HOLDER OF AN IMPAIRED CLAIM TO ACCEPT THE PLAN. UNLESS
OTHERWISE SPECIFICALLY INDICATED, THE FINANCIAL INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT HAS NOT BEEN AUDITED AND IS
BASED ON AN ANALYSIS OF DATA AVAILABLE AT THE TIME OF THE
PREPARATION OF THE PLAN AND THIS DISCLOSURE STATEMENT.
TO BE COUNTED, THE BALLOTS UPON WHICH HOLDERS OF IMPAIRED CLAIMS
ENTITLED TO VOTE SHALL CAST THEIR VOTE TO ACCEPT OR REJECT THE PLAN
INDICATING ACCEPTANCE OR REJECTION OF THE PLAN MUST BE RECEIVED IN
ACCORDANCE WITH THE INSTRUCTIONS ON SUCH BALLOT.
THIS DISCLOSURE STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A AND SECTION 21E OF THE SECURITIES
ACT, AS AMENDED. SUCH STATEMENTS MAY CONTAIN WORDS SUCH AS "MAY,
"WILL," "MIGHT," "EXPECT," "BELIEVE, "ANTICIPATE," "COULD,"
"WOULD," "ESTIMATE," "CONTINUE," "PURSUE," OR THE NEGATIVE THEREOF
OR COMPARABLE TERMINOLOGY, AND MAY INCLUDE, WITHOUT LIMITATION,
INFORMATION REGARDING THE DEBTOR'S EXPECTATIONS REGARDING
FUTURE
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EVENTS. FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN,
PARTICULARLY IN LIGHT OF THE UNCERTAINTIES OF LITIGATION, AND
ACTUAL RESULTS MAY DIFFER FROM THOSE EXPRESSED OR IMPLIED IN THIS
DISCLOSURE STATEMENT AND THE FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN. IN PREPARING THIS DISCLOSURE STATEMENT, THE DEBTOR RELIED
ON FINANCIAL DATA DERIVED FROM ITS BOOKS AND RECORDS OR THAT WAS
OTHERWISE MADE AVAILABLE TO IT AT THE TIME OF SUCH PREPARATION AND
ON VARIOUS ASSUMPTIONS. WHILE THE DEBTOR BELIEVES THAT SUCH
FINANCIAL INFORMATION FAIRLY REFLECTS THE FINANCIAL CONDITION OF
THE DEBTOR AS OF THE DATE HEREOF AND THAT THE ASSUMPTIONS REGARDING
FUTURE EVENTS REFLECT REASONABLE BUSINESS JUDGMENTS, NO
REPRESENTATIONS OR WARRANTIES ARE MADE AS TO THE ACCURACY OF THE
FINANCIAL INFORMATION CONTAINED HEREIN OR THE DEBTOR'S FORECAST OF
POTENTIAL DISTRIBUTIONS UNDER THE PLAN. THE DEBTOR EXPRESSLY
CAUTIONS READERS NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN. AMONG THE FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM CURRENT ESTIMATES OF
FUTURE PERFORMANCE ARE THE FOLLOWING: (1) THE DEBTOR'S ABILITY TO
DEVELOP, PROSECUTE, CONFIRM, AND CONSUMMATE A PLAN WITH RESPECT TO
THIS CHAPTER 11 CASE; (2) THE OUTCOME AND TIMING OF THE DEBTOR'S
EFFORTS TO SELL CERTAIN ASSETS; AND (3) OUTCOMES OF, AMONG OTHER
THINGS, LITIGATION WITH THE FDIC-RECEIVER AND OTHERS.
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS AS OF
THE FILING DATE OF THIS DISCLOSURE STATEMENT AND THE DEBTOR IS
UNDER NO OBLIGATION, AND EXPRESSLY DISCLAIMS ANY OBLIGATION, TO
PUBLICLY UPDATE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT
OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE.
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TABLE OF CONTENTS Page
Chapter I. INTRODUCTION
...................................................................................................1
Chapter II.
SUMMARY.............................................................................................................3
A.
Overview.............................................................................................................................
3 B. Frequently Asked Questions
...............................................................................................
5
1. Who is the Debtor?
.................................................................................................
5 2. How long has the Debtor been in Chapter 11?
....................................................... 5 3. What
is Chapter
11?................................................................................................
6 4. Has the Debtor proposed a plan of
liquidation?......................................................
6 5. What type of Plan was filed?
..................................................................................
6 6. How does the Plan work?
.......................................................................................
6 7. What is confirmation of the Plan?
..........................................................................
7 8. Who votes on the
Plan?...........................................................................................
7 9. How can I determine if my Claim is allowed?
....................................................... 7 10. How
can I determine if my Claim or Equity Interest is
impaired?......................... 7 11. How can I determine in
which Class my Claim or Equity Interest has been
placed?
....................................................................................................................
8 12. How can I determine what I will receive under the Plan?
...................................... 8 13. Do I have to vote for
the Plan to receive a Distribution based on my Claim?........ 8 14.
How is the Plan accepted?
......................................................................................
8 15. If my Class votes to accept the Plan, do I get what the Plan
provides for my
Class?
......................................................................................................................
8 16. How do I vote on the
Plan?.....................................................................................
9 17. Is my Claim or Equity Interest being paid in full under the
Plan? ......................... 9 18. What is the amount of my
Claim or Equity Interest?
............................................. 9 19. When will the
Distribution on my Claim be made?
............................................... 9 20. To what
address will the Distribution be
sent?..................................................... 10 21.
Is the Debtor suing people responsible for any losses suffered by
the Debtor? ... 10 22. Do I have additional rights or remedies
against third parties?.............................. 11 23. Are
there risk factors associated with consummation of the Plan?
...................... 11 24. Have there been settlement
discussions with the FDIC-Receiver? ...................... 11
Chapter III. GENERAL INFORMATION ABOUT THE DEBTOR
.......................................11
A. Debtor's Business and Events Leading to Bankruptcy
Filing........................................... 12 B. Debtor's
Capital
Structure.................................................................................................
13
1. Common
Stock......................................................................................................
13 2. Preferred
Stock......................................................................................................
13 3. Public
Debt............................................................................................................
14
a. Preferred Securities Debentures -- $103,092,800
..................................... 14 b. 2003 Indenture --
$5,155,000....................................................................
18 c. 2008 Indenture --
$250,000,000................................................................
20
4. Other Liabilities.
...................................................................................................
23
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C. Debtor's Major Benefit Plans.
...........................................................................................
24
1. 401(k)
Plan............................................................................................................
24 2. Pension
Plan..........................................................................................................
25 3. Non-Qualified Deferred Compensation
Plan........................................................ 26 4.
Certain Director Benefit Plans.
.............................................................................
26
Chapter IV. THE DEBTOR'S CURRENT AND FORMER MANAGEMENT
.......................27
Chapter V. THE DEBTOR'S SIGNIFICANT ASSETS AND
LIABILITIES.........................28
A. The Debtor's Assets
..........................................................................................................
28
1. The Debtor's Bank Account Deposits.
..................................................................
28 2. Funds Derived From the Liquidation of a Deferred Compensation
Account....... 30 3. Debtor's Interest in Potential Tax Refunds.
.......................................................... 31 4.
Fidelity Policies and Claims Relating Thereto.
.................................................... 33 5. D&O
Policies and Derivative Claims.
..................................................................
34 6. CBG Florida REIT
Corp.......................................................................................
35 7. CBG Real Estate,
LLC..........................................................................................
37 8. Refunds of Unearned Premiums.
..........................................................................
38 9. Real Property in Orlando,
Florida.........................................................................
38
a. Dispute with FDIC-Receiver
....................................................................
38 b. Condemnation Proceeding
........................................................................
39
10. Furniture, Art and Office
Equipment....................................................................
39 11. Claims Against Certain Subsidiaries.
...................................................................
40
a. Colonial Bank
...........................................................................................
40 b. Colonial Brokerage, Inc.
...........................................................................
42
12. LBSF Claim.
.........................................................................................................
42 13. Other Claims.
........................................................................................................
43
B. The Debtor's
Liabilities.....................................................................................................
43
Chapter VI. PENDING LEGAL ACTIONS AND REGULATORY PROCEEDINGS
.........46
A. Pre-Petition Actions Against the
Debtor...........................................................................
46
1. Pending Investigations.
.........................................................................................
46 2. Regulatory
Orders.................................................................................................
46 3. Pending
Litigation.................................................................................................
47
a. Securities Litigation
..................................................................................
47 b. Shareholder Derivative
Litigation.............................................................
48 c. ERISA Litigation
......................................................................................
49 d. Other
Litigation.........................................................................................
50 e. Present Posture of All
Litigation...............................................................
51
B. Potential Estate Causes of Action
.....................................................................................
51
Chapter VII. POTENTIAL CLAIMS BY AND AGAINST THE
DEBTOR.............................51
A. Claims By the
Debtor........................................................................................................
51
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1. Claim Against
Insiders..........................................................................................
53 2. Professional Liability.
...........................................................................................
53 3. Insurance
Claims...................................................................................................
53 4. Piercing Corporate Veil.
.......................................................................................
53 5. Preferences and Fraudulent Conveyances.
........................................................... 54
B. Claims Against the
Debtor................................................................................................
55
Chapter VIII. SIGNIFICANT POST-PETITION DEVELOPMENTS AND
STATUS............55
A. Filing of Chapter 11 Case
.................................................................................................
55 B. Establishment of a Bar Date
.............................................................................................
55 C. Formation of Unsecured Creditors
Committee.................................................................
55 D. Stock Trading
Motion.......................................................................................................
55 E. FDIC-Receiver Litigation
.................................................................................................
56
1. 365(o) Litigation and Fraudulent Transfer
Litigation........................................... 56
a. Alleged Capital Maintenance Commitment Under Section 365(o);
Bankruptcy Court's Denial of FDIC-Receiver's Motion; Appeal to
District Court
.........................................................................................................
56
b. Fraudulent Transfer Litigation; Withdrawal of Reference; Stay
of Proceedings
...............................................................................................
57
2. Deposit Account
Litigation...................................................................................
58
a. Original Stay Relief
Motion......................................................................
58 b. Amended Stay Relief Motion
...................................................................
58 c. Renewed Stay Relief Motion
....................................................................
59
3. Debtor's Claim in Colonial Bank Receivership.
................................................... 60 4.
FDIC-Receiver's Claim in Debtor's Chapter 11 Bankruptcy Case.
...................... 60 5. Tax Return and Refund Litigation.
.......................................................................
61 6. Fidelity Policies
Litigation....................................................................................
62 7. Garland Avenue Property
Litigation.....................................................................
63
F. Deferred Compensation Litigation
...................................................................................
63 G. Litigation with the Alabama Revenue Department
.......................................................... 63 H.
Claims Against Directors and Officers
.............................................................................
64 I. Custody and Disposition of Debtor's Business
Records................................................... 64
1. Ownership Disputes.
.............................................................................................
65 2. 2004 Examination and Document Production Request.
....................................... 65 3. Current Status of
Document
Retrieval..................................................................
66
J. SEC Administrative Proceeding
.......................................................................................
66 K. Costs of Administration of Debtor's Bankruptcy
Case..................................................... 67
Chapter IX. SUMMARY OF THE
PLAN...............................................................................68
A. Overview of the Plan
........................................................................................................
68 B. Classification and Treatment of Claims under the
Plan.................................................... 69
1. Payment and Treatment of Priority Claims.
......................................................... 69
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a. Administrative Claims
..............................................................................
70 b. Priority Tax
Claims...................................................................................
72 c. Class A (Priority Non-Tax Claims)
.......................................................... 72
2. Classification and Treatment of Non-Priority Claims.
......................................... 73
a. Class B (Certain Secured
Claims).............................................................
73 b. Class C (Secured Claim of Alabama Revenue Department)
.................... 74 c. Class D (Convenience Class Claims)
....................................................... 74 d. Class
E (Certain General Unsecured
Claims)........................................... 74 e. Class F
(Indenture Claims)
.......................................................................
75 f. Class G (Statutorily Subordinated
Claims)............................................... 75 g. Class
H (Preferred Stock)
.........................................................................
75 h. Class I (Equity Interests other than Preferred
Stock)................................ 75
C. Structure of the Debtor After the Effective Date
.............................................................. 76
D. Management of the Debtor
...............................................................................................
76 E. Identity and Compensation of Insiders
.............................................................................
76
Chapter X. IMPLEMENTATION OF THE PLAN
...............................................................77
A. The Debtor and the Plan Trustee
......................................................................................
77 B. The Plan Committee
.........................................................................................................
79 C. Claims
Administration......................................................................................................
81
1. Allowance of
Claims.............................................................................................
81 2. Objections to
Claims.............................................................................................
82 3. Temporary Allowance and Estimation of
Claims................................................. 82
a. Temporary Allowance of Claims for Voting
Purposes............................. 82 b. Estimation of Claims
for Distribution Purposes .......................................
83
4. Reserve for Disputed Claims.
...............................................................................
83
C. Funding of the
Plan...........................................................................................................
83 D. Discharge of
Claims..........................................................................................................
83 E. Plan Injunction
..................................................................................................................
84 F. Exculpation of the Debtor, the Case Committee and the
Indenture Trustees................... 84 G. Means of Implementing
the Plan
......................................................................................
84 H. Abandonment of Estate Property
......................................................................................
85
Chapter XI. CONDITIONS PRECEDENT TO CONFIRMATION CONTAINED IN
THE BANKRUPTCY
CODE.................................................................................................................86
A. Section 1129 of the Bankruptcy Code
..............................................................................
86 B. Acceptance of the
Plan......................................................................................................
88 C. Confirmation Without Acceptance of All Impaired Classes -
Cramdown ....................... 89 D. "Best Interests"
Test..........................................................................................................
89 E.
Feasibility..........................................................................................................................
91
Chapter XII. RISK FACTORS
...................................................................................................92
A. Certain Bankruptcy Law Considerations
..........................................................................
92
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l. Objections to Plan's Classification of Claims and Equity
Interests. ..................... 92 2. Failure to Satisfy Voting
Requirements................................................................
92 3. Inability to Secure Confirmation of Plan.
............................................................. 92 4.
Nonconsensual
Confirmation................................................................................
93 5. Objections to Amount or Classification of a
Claim.............................................. 93 6. Risk of
Non-Occurrence of Effective
Date........................................................... 94
7. Effect of Certain
Contingencies............................................................................
94
B. Certain Risk Factors that May Affect
Recovery...............................................................
94
1. The Debtor Cannot State with Certainty Recovery
Amounts............................... 94 2. Uncertainties of
Litigation.
...................................................................................
95
a. Capital Maintenance
Claim.......................................................................
95 b. Tax Refund Dispute with FDIC-Receiver
................................................ 95 c. Dispute Over
Fidelity Policies with FDIC-Receiver
................................ 96 d. Bank Account Disputes with
FDIC-Receiver........................................... 96 e. Bank
Account Disputes with
BB&T.........................................................
96 f. Garland Avenue Property Dispute with FDIC-Receiver
.......................... 97 g. D&O Policies Dispute with
FDIC-Receiver and Others .......................... 97
3. Settlement Discussions with
FDIC-Receiver........................................................
98
C. Disclosure Statement Disclaimers
..................................................................................
101
1. Information Contained Herein is for Soliciting Votes.
....................................... 101 2. Disclosure Statement
Not Approved by the SEC; Registration Exemption. ...... 101 3. No
Legal or Tax Advice Provided by Disclosure Statement.
............................. 101 4. No
Admissions....................................................................................................
101 5. Failure to Identify Litigation Claims or Projected
Objections............................ 101 6. No Waiver of Debtor's
Rights.............................................................................
102 7. Debtor Professionals' Reliance.
..........................................................................
102 8. Potential for Inaccuracies; No Duty to Update.
.................................................. 102 9. No
Representations Outside Disclosure Statement Are
Authorized................... 102
Chapter XIII. ALTERNATIVES TO THE
PLAN...................................................................102
A. Chapter 7 Liquidation
.....................................................................................................
103 B. Alternative Liquidation Plans
.........................................................................................
104
Chapter XIV. OTHER
MATTERS...........................................................................................104
A. Tax Consequences of the Plan
........................................................................................
104 B. Disclaimers
.....................................................................................................................
104 C. Confirmation Hearing
.....................................................................................................
105 D. Conditions to Effectiveness of the Plan
..........................................................................
105 E. Plan Injunction
................................................................................................................
106 F. Retention of Jurisdiction by the Bankruptcy Court
........................................................ 106 G.
Amendments to the Plan
.................................................................................................
108 H. Cram
down......................................................................................................................
108 I. No
Admissions................................................................................................................
108
Chapter XV. CONCLUSION AND
RECOMMENDATION.................................................109
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EXHIBIT A Plan of
Liquidation...................................................................................................A
EXHIBIT B Brief Explanation of Chapter 11
..............................................................................B
EXHIBIT C Debtor's Known Subsidiaries as of June 30, 2009
...................................................C
EXHIBIT D List of Individuals /
Entities.....................................................................................D
EXHIBIT E Resume of Ben S.
Branch.........................................................................................
E
EXHIBIT F Liquidation
Analysis.................................................................................................
F
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Chapter I. INTRODUCTION
On August 25, 2009 (the "Petition Date"), The Colonial
BancGroup, Inc. (the "Debtor") filed with the United States
Bankruptcy Court for the Middle District of Alabama (the
"Bankruptcy Court") a voluntary petition for relief under Chapter
11 of Title 11 of the United States Code, 11 U.S.C. 101, et seq.
(the "Bankruptcy Code").
The Debtor is a corporation formed under the laws of the State
of Delaware and, prior to the Petition Date, was headquartered and
conducted business at 100 Colonial Bank Boulevard, Montgomery,
Alabama 36117. Prior to the Petition Date, the Debtor owned 100% of
the common stock of Colonial Bank and also owned certain
non-banking, non-debtor subsidiaries.
On August 14, 2009, Colonial Bank was closed by the Alabama
State Banking Department, and the Federal Deposit Insurance
Corporation (the "FDIC") was appointed as receiver for Colonial
Bank (in such capacity, the "FDIC-Receiver"). On the same day, the
FDIC-Receiver and the FDIC (in its corporate capacity) entered into
a Purchase and Assumption Agreement dated as of August 14, 2009,
with Branch Banking & Trust Company ("BB&T") (as at any
time amended, the "P&A Agreement") pursuant to which BB&T
acquired certain former assets and assumed certain former
liabilities of Colonial Bank. Since the Petition Date, the Debtor
has continued to manage its business affairs as debtor in
possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy
Code.
The Debtor now seeks confirmation of a proposed First Amended
Chapter 11 Plan of Liquidation of The Colonial BancGroup, Inc. (the
"Plan"), a copy of which is attached to this Disclosure Statement
as Exhibit A. This Disclosure Statement (the "Disclosure
Statement") is designed to provide creditors with adequate
information to enable them to make a decision whether to vote for
or against the Plan. This Disclosure Statement discusses, among
other things, (i) voting instructions, (ii) classification of
claims against the Debtor, (iii) payments of claims, and (iv) the
Debtor's history, business, and property. This Disclosure Statement
also contains a summary and analysis of the Plan. All creditors and
interest holders of the Debtor are advised and urged to read this
Disclosure Statement, the Plan and any other Exhibit attached to
this Disclosure Statement in its entirety before voting to accept
or reject the Plan. This Disclosure Statement was approved by Order
of the Bankruptcy Court.
NO REPRESENTATIONS ABOUT THE DEBTOR OR THE PLAN ARE AUTHORIZED
EXCEPT AS CONTAINED IN THIS DISCLOSURE STATEMENT AND THE PLAN, AND,
IN MAKING YOUR DECISION WHETHER TO VOTE FOR OR AGAINST THE PLAN,
YOU SHOULD NOT RELY ON ANY REPRESENTATION THAT IS NOT CONTAINED
HEREIN. INSTEAD, ANY SUCH REPRESENTATION OR INDUCEMENT SHOULD BE
REPORTED DIRECTLY TO THE BANKRUPTCY COURT OR TO THE DEBTOR OR ITS
COUNSEL. THE BANKRUPTCY COURT HAS NOT VERIFIED THE ACCURACY OF THE
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, AND THE
BANKRUPTCY COURT'S APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT
IMPLY THAT THE BANKRUPTCY COURT ENDORSES OR APPROVES THE PLAN, BUT
ONLY THAT, IF ACCURATE, THE INFORMATION SET FORTH IN THIS
DISCLOSURE STATEMENT IS SUFFICIENT TO PROVIDE AN ADEQUATE BASIS FOR
CREDITORS AND EQUITY
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INTEREST HOLDERS TO MAKE INFORMED DECISIONS WHETHER TO ACCEPT OR
REJECT THE PLAN.
Accompanying this Disclosure Statement are copies of:
1. the notice fixing the time for submitting acceptances or
rejections of the Plan, the time for filing objections to the Plan,
and the date and time of the hearings to consider confirmation of
the Plan and related matters; and
2. for those Holders of Claims or Preferred Stock entitled to
vote on the Plan, a ballot for voting on acceptance or rejection of
the Plan.
Section 1126(b) of the Bankruptcy Code provides that only
classes of claims or equity interests that are "impaired" under a
plan are entitled to vote on that plan unless deemed not to accept
the plan. Under the Plan, the following classes of claims (all as
described more fully in the Plan) will be impaired: Class D -
Convenience Claims; Class E - Certain General Unsecured Claims;
Class F - Indenture Claims; and Class G - Statutorily Subordinated
Claims. The Plan also impairs the equity interests in Class H -
Preferred Stock and Class I - Equity Interests other than Preferred
Stock. The Debtor is sending ballots to all of the Holders of
impaired Claims known to the Debtor except Class G, as there are no
known members of that Class at this time. The Debtor will also not
be sending ballots to the Holders of Common Stock (Class I), who
are deemed to have rejected the Plan as they are not entitled to
receive or retain anything under the Plan.
Defined Terms and Conflict between Plan and Disclosure
Statement. Most words or phrases used in this Disclosure Statement
shall have their usual and customary meanings. Words or phrases
used in this Disclosure Statement that are defined in the Plan, and
not otherwise defined in this Disclosure Statement, shall have the
definitions set forth in the Plan. Otherwise, the capitalized terms
used but not defined in this Disclosure Statement shall have the
meaning ascribed to such terms in the Bankruptcy Code or the
Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"). In
the event of any conflict between any statement in this Disclosure
Statement and in the Plan, the Plan will control.
Voting Instructions. After carefully reviewing the Disclosure
Statement and its Exhibits, please indicate your vote on the
enclosed ballot. IN ORDER FOR YOUR VOTE TO COUNT, YOUR BALLOT (OR,
IN THE INSTANCE OF CLASS F - INDENTURE CLAIMS, THE MASTER BALLOT)
MUST BE RECEIVED BEFORE 4:00 P.M., CENTRAL TIME, ON APRIL 25, 2011,
unless such deadline is extended by the Debtor to the extent
authorized (the "Voting Deadline"). If you have a Claim in more
than one Class under the Plan, you should receive a separate ballot
for each such Claim. If you need additional ballots, please contact
the person identified in the instructions to the ballot that you
receive.
It is important that you exercise your right to vote to accept
or reject the Plan. You should read the ballot carefully and follow
the instructions. In voting for or against the Plan, please use
only the ballot(s) sent to you with this Disclosure Statement or
obtained from the person identified in the instructions to the
ballot. Ballots that are signed and returned, but not
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expressly voted either for acceptance or rejection of the Plan,
will be counted as an acceptance of the Plan.
YOU SHOULD RETURN YOUR COMPLETED BALLOT(S) TO THE PERSON
IDENTIFIED IN THE INSTRUCTIONS TO YOUR BALLOT(S) BY THE DEADLINE
NOTED IN YOUR BALLOT(S).
Chapter II. SUMMARY
A. Overview
On the Petition Date, the Debtor filed with the Bankruptcy Court
a voluntary petition for relief under Chapter 11 of the Bankruptcy
Code. The Debtor continues to operate its business as debtor in
possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy
Code. No request has been made in this Chapter 11 bankruptcy case
for the appointment of a trustee or an examiner.
The Debtor's core assets on the Petition Date consisted
primarily of: (a) the Debtor's bank account deposits in the
approximate amount of $36,000,000 (which amounts are the subject of
asserted, but disputed, secured claims and setoff rights); (b)
approximately $1,900,000 of deposits derived from the liquidation
of a deferred compensation account; (c) the Debtor's interest in
certain potential tax refunds in excess of $253,000,000 (which
requests remain pending with the Internal Revenue Service and are
the subject of litigation with the FDIC-Receiver); (d) the Debtor's
interest in claims made under and proceeds of Fidelity Policies
with policy limits of $25,000,000 (which is the subject of a
dispute as to ownership and entitlement with the FDIC-Receiver);
(e) the Debtor's interest in certain derivative claims against
former officers and directors of the Debtor and in the proceeds of
the D&O Policies with policy limits of $35,000,000 (less
attorneys' fees and expenses of certain defense counsel currently
in excess of $3,000,000); (f) the Debtor's interest in and claims
relating to certain 300,000 shares of preferred securities in CBG
Florida REIT Corp. that had an original par value of $1,000 (which
interests and claims are disputed by the FDIC-Receiver and likely
BB&T); (g) the Debtor's interest in and claims relating to the
CBG Real Estate, LLC, the Debtor's wholly-owned Alabama limited
liability company, which purchased loans in the approximate face
amount of $120,000,000 in December 2008 from Colonial Bank and
later appears to have granted a 65% participation interest in such
loans (which is asserted by the current holder to be senior in
priority to the repayment of the non-participated portion of the
loans) and thereafter transferred that participation interest to
Colonial Bank; (h) refunds for unearned premiums under various
policies of insurance; (i) an interest in certain real property in
Orlando, Florida; (j) proceeds from the sale of certain furniture,
art and office equipment located in Montgomery, Alabama at the
Debtor's former headquarters building; (k) claims against certain
subsidiaries such as Colonial Brokerage, Inc., which filed a
voluntary petition for relief under Chapter 7 of the Bankruptcy
Code in Montgomery, Alabama; (l) claims asserted in the bankruptcy
case of Lehman Brothers Special Financing Inc. ("LBSF") in the
amount of $4,053,591 that have been asserted in a proof of claim
filed by the Debtor (which proof of claim has been or likely will
be objected to by LBSF); and (m) a claim in both liquidated and
unliquidated amounts against Colonial Bank in its receivership
proceeding administered by the FDIC-Receiver that was disallowed by
the FDIC-Receiver but remains the subject of pending litigation,
all as described more fully herein (collectively, the
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"Core Assets"). As described in greater detail in later sections
of this Disclosure Statement, the FDIC-Receiver, BB&T and the
Alabama Revenue Department assert claims to, liens upon, or rights
of offset with respect to substantially all of the Core Assets and
any judicial rulings adverse to the Debtor with respect to any or
all of these claims, liens and asserted rights of offset would
substantially diminish the proceeds available for distribution to
Holders of General Unsecured Claims and Preferred Stock.
Since the Petition Date, the Debtor has focused its efforts on
pursuing and liquidating to varying degrees these Core Assets. This
process will continue in 2011 and, in the absence of resolutions
between the Debtor and the relevant parties in interest with
respect to Core Assets in dispute, likely beyond 2011. The
FDIC-Receiver contends that virtually all assets that the Debtor
asserts are part of its Chapter 11 estate constitute property of
the FDIC-Receiver and/or BB&T and that, irrespective of the
outcome of litigation regarding ownership of such assets, the
FDIC-Receiver is entitled to receive substantially all of the
proceeds of such assets by virtue of an asserted priority claim
under Sections 507(a)(2) and/or 507(a)(9) of the Bankruptcy Code.
For an additional description of the risks associated with the Plan
resulting from litigation with the FDIC-Receiver and others, see
"Risk Factors" (Chapter XII). In addition to liquidating the Core
Assets, the Debtor is assessing the existence and collectability of
claims against other third parties, the pursuit of which may
supplement the proceeds of the Core Asset liquidation. These claims
include, but are not limited to, bankruptcy avoidance claims (such
as preference and fraudulent conveyance actions), potential claims
against professionals (including attorneys and accountants)
employed by the Debtor prior to the Petition Date, and claims
against other affiliated and related companies and former officers,
directors and professionals for such companies. These actual and
potential claims held by the Debtor for the benefit of Holders of
Claims and Equity Interests are described in greater detail in
Chapter VII of this Disclosure Statement.
In furtherance of the Debtor's goal to liquidate its assets and
distribute the proceeds thereof to its creditors, the Debtor has
prepared this Disclosure Statement and the Plan. The Plan provides
a structure for the continuation and completion of the liquidation
process and the distribution of the resulting proceeds. The Plan,
if confirmed by the Bankruptcy Court, will be binding on the Debtor
and its creditors and interest holders as to the issues addressed
in the Plan, including, but not limited to, (i) the ongoing
structure of the Debtor during the remaining liquidation process,
(ii) the guidelines for conducting the liquidation, (iii) the
manner in which creditors' claims will be determined, (iv) the
method for distributing liquidation proceeds, (v) the
classification of creditors' claims based on their relative rights,
(vi) the entitlement of each creditor, in accordance with such
classification, to a Distribution in whole or partial satisfaction
of its claim, and (vii) certain injunction, stay and exculpation
provisions. For this reason, the terms of the Plan and the
treatment of Claims and Equity Interests under the Plan are
significant issues that each creditor and interest holder should
consider carefully.
Under the Bankruptcy Code, a disclosure statement serves the
purpose of providing information regarding a debtor and a proposed
plan. The information contained in a disclosure statement is
required to be sufficient to allow a creditor to make an informed
decision regarding the terms of a plan and should be reviewed
carefully. Even so, a proposed plan ultimately defines the rights
and obligations of the parties and must be referred to for an
accurate determination of such rights and obligations.
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The ultimate return for creditors under the Plan will depend on
the success of the liquidation process, the successful pursuit of
third party claims, the determination and resolution of Disputed
Claims (including the FDIC-Receiver's Disputed Claim) and the
successful outcome of litigation with the FDIC-Receiver and others
regarding ownership of and interests in the Debtor's Core Assets.
See Risk Factors, Chapter XII. The Debtor believes, however, that
the Plan is the best method for completing the liquidation process
and maximizing the return on the Debtor's assets. Given the
considerable knowledge and information developed by the Debtor, and
the need for quick action to preserve the value of the Debtor's
assets and to maximize the return to its creditors, other
alternatives, such as converting this bankruptcy case to a Chapter
7 liquidation, would simply delay distribution of funds to
creditors and add unnecessary expense.
Creditors should note that any Distributions they receive under
the Plan, if confirmed by the Bankruptcy Court, will represent the
total amount that creditors can expect to receive from the Debtor
or Estate Property in payment of their Claims because all available
assets of the Debtor that can be recovered in a cost-effective
manner will be liquidated and distributed in accordance with the
Plan. However, depending on the circumstances surrounding a given
creditor's claim, the creditor may have independent claims, rights
and remedies against individuals or entities other than the Debtor
(or against property other than Estate Property) for recovery of
all or a part of any deficiency existing after all of the Debtor's
assets that can be recovered in a cost-effective manner have been
liquidated and distributed. This Disclosure Statement provides some
information that may be relevant to the consideration of such
independent rights and remedies, and the Plan, if confirmed by the
Bankruptcy Court, will not prevent creditors from pursuing such
claims, if any, that may exist while the Debtor's bankruptcy case
is pending or after the bankruptcy case is closed. Creditors also
should be aware that any such claims against Persons other than the
Debtor are subject to state and federal statutes of limitations
(which require that claims be brought within a specified period of
time or possibly be waived) and that the filing of the Debtor's
bankruptcy case does not toll the running of these statutes of
limitations. The Debtor recommends that each creditor seek
independent legal advice regarding the existence and nature of any
such independent rights and remedies.
B. Frequently Asked Questions
Set forth below is a list of frequently asked questions and
answers to assist each creditor in understanding the Debtor's
bankruptcy case and the proposed Plan:
1. Who is the Debtor?
The Debtor is a Delaware corporation which, prior to the
Petition Date, was headquartered in Montgomery, Alabama. The Debtor
was a publicly traded corporation with its principal assets
consisting of the capital stock of Colonial Bank.
2. How long has the Debtor been in Chapter 11?
As noted above, the Debtor filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code on August 25,
2009.
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3. What is Chapter 11?
Chapter 11 is the chapter of the federal Bankruptcy Code
frequently used for the reorganization or liquidation of a
business. Under Chapter 11, a company may attempt to restructure
its finances so that it can continue to operate its business or to
liquidate its assets in an orderly manner so that all creditors
will be treated fairly.
Formulation of a plan of reorganization or liquidation is the
primary purpose of a Chapter 11 case. A Chapter 11 plan sets forth
and governs the treatment and rights to be afforded to creditors
and interest holders with respect to their claims against and
equity interests in a debtor. According to Section 1125 of the
Bankruptcy Code, acceptances of a Chapter 11 plan may be solicited
by a debtor only after a written disclosure statement approved by
the Bankruptcy Court has been provided to each creditor or interest
holder who is entitled to vote on the plan. This Disclosure
Statement is presented to the Debtor's creditors and interest
holders to satisfy the disclosure requirements contained in Section
1125 of the Bankruptcy Code. A more detailed description of the
Chapter 11 process may be found at Exhibit B to this Disclosure
Statement.
4. Has the Debtor proposed a plan of liquidation?
Yes. On December 9, 2010, the Debtor filed its initial plan and
disclosure statement. The Plan and this Disclosure Statement amend
(and supersede) the initial plan and disclosure statement in their
entirety. The Plan provides for an orderly liquidation of the
Debtor's assets. A copy of the Plan is attached to this Disclosure
Statement as Exhibit A.
5. What type of Plan was filed?
The Plan calls for an orderly liquidation of the Debtor's assets
and the Distribution of the proceeds to its Holders of Allowed
Claims and, in the unlikely event that all such Claims are paid in
full, to Holders of its Preferred Stock.
6. How does the Plan work?
Under the Plan, the Plan Trustee will continue the task of
liquidating the assets of the Debtor and distributing the proceeds
of these assets to the Debtor's creditors in accordance with the
Plan. After confirmation of the Plan, the Plan Trustee, acting on
behalf of the Debtor, will be authorized to pursue, collect and
liquidate the remaining assets of the Debtor. In the event of the
death, incapacity, resignation or the Bankruptcy Court's removal of
the Plan Trustee for any alleged misconduct, a new Plan Trustee
will be appointed by the Plan Committee as a successor Plan
Trustee, subject to the rights of creditors to file an objection
with the Bankruptcy Court to such designated successor Plan
Trustee.
The Debtor's available cash, together with the proceeds (if any)
obtained as a result of litigation or from the liquidation of other
assets, will be used to fund the costs of implementing the Plan.
The balance of these funds, upon the completion of the liquidation
process, will be distributed to creditors and interest holders in
accordance with the Plan.
Under the Plan, the Debtor, acting through the Plan Trustee,
will investigate and evaluate claims the Debtor may have against
both affiliated companies and third parties, the pursuit of
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which may supplement this cash. These claims include, but are
not limited to, bankruptcy avoidance claims (such as preference and
fraudulent conveyance actions), claims for breach of fiduciary
duties by former officers and directors of the Debtor, and claims
against professionals (such as attorneys and accountants) employed
by the Debtor before bankruptcy. In addition, the Plan Trustee will
investigate and pursue, where appropriate, contingent claims that
the Debtor may have against third parties based on transactions
that occurred prior to the commencement of this bankruptcy case.
These claims constitute a part of the assets of the Debtor and, if
recovered, may produce an additional source of funds for
Distribution to creditors depending on the outcome of the
litigation and the collectability of any judgments. Additional
information regarding potential claims the Debtor may have is set
forth in Chapter VII, Section A of this Disclosure Statement.
7. What is confirmation of the Plan?
Confirmation means that the Bankruptcy Court approves the Plan,
at which time the Plan becomes binding on the Debtor and its
creditors and Equity Interest Holders. The Bankruptcy Court must
hold a confirmation hearing before it approves the Plan. The
Bankruptcy Court has ordered that the confirmation hearing shall be
held on May 11, 2011 at 10:00 a.m., Central Time, at the United
States Bankruptcy Court, Middle District of Alabama, One Church
Street, Montgomery, Alabama 36104. Chapter XI and Exhibit B to this
Disclosure Statement contain more information on the requirements
for confirmation of the Plan.
8. Who votes on the Plan?
Creditors holding Allowed Claims (other than Class G) may vote
on the Plan provided that their Claims are impaired by the
treatment proposed in the Plan. The following classes of Allowed
Claims (all as described more fully in the Plan) will be impaired
under the Plan: Class D - Convenience Claims; Class E - Certain
General Unsecured Claims; Class F - Indenture Claims; Class G -
Statutorily Subordinated Claims; and Class H - Preferred Stock.
Common Stock -- Class I (Equity Interests other than Preferred
Stock) -- will also be impaired, but the Holders thereof will be
deemed to reject the Plan and not allowed to vote thereon.
9. How can I determine if my Claim is allowed?
Chapter X, Section C of this Disclosure Statement explains how
to determine if your Claim or Equity Interest is allowed for voting
purposes. Only Holders of Allowed Claims may vote on and receive
Distributions under the Plan. Each Holder of an Allowed Claim
impaired by the treatment proposed in the Plan will receive a
ballot to vote on the Plan. If you do not receive a ballot and
believe that you should have, you should contact J. David Freedman
at (404) 523-6995.
10. How can I determine if my Claim or Equity Interest is
impaired?
Article 5 of the Plan describes in detail which Claims and
Equity Interests are impaired, and that Article should be read
carefully. Allowed Claims in the following categories or classes
are not impaired: Administrative Claims; Priority Tax Claims; Class
A - Priority Non-Tax Claims; Class B - Certain Secured Claims; and
Class C - Secured Claim of Alabama Revenue Department. The
following classes of Allowed Claims will be impaired under the
Plan: Class D
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- Convenience Claims; Class E - Certain General Unsecured
Claims; Class F - Indenture Claims; Class G - Statutorily
Subordinated Claims; Class H - Preferred Stock; and Class I -
Equity Interests other than Preferred Stock. Equity Interests other
than Preferred Stock will be impaired under the Plan and,
additionally, Holders of Common Stock will not be entitled to
receive or retain any property under the Plan.
11. How can I determine in which Class my Claim or Equity
Interest has been placed?
Chapter IX, Section B of this Disclosure Statement and Article 2
of the Plan describe the Classes of Claims and Equity Interests.
The ballot that you receive will advise you in which Class the
Debtor has placed your Claim, subject to objections as to the
allowance of your Claim. If you disagree with the Class in which
the Debtor has placed your Claim, you must file an objection with
the Bankruptcy Court. Refer to Chapter XIV, Section C of this
Disclosure Statement for further information on filing objections
to confirmation of the Plan.
12. How can I determine what I will receive under the Plan?
Chapter IX, Section B of this Disclosure Statement and Articles
3 through 6 of the Plan also describe the treatment of each class
of Claims and Equity Interests under the Plan.
13. Do I have to vote for the Plan to receive a Distribution
based on my Claim?
No, provided the Plan is confirmed. If confirmed, the Holders of
Allowed Claims will receive whatever the Plan provides for the
Class in which such Claims have been placed, whether or not you
vote for or against the Plan by sending in your ballot. If you are
the Holder of a Claim and support confirmation of the Plan,
however, you should be sure to fill out the ballot correctly and
return it before the deadline noted on your ballot. It is not
anticipated that the Holders of Statutorily Subordinated Claims or
the Holders of Preferred Stock will receive any Distribution under
the Plan even if the Plan is confirmed, but they are entitled to
receive Distributions if there is Available Cash for that purpose
after all other Allowed Claims are Paid in Full.
14. How is the Plan accepted?
For a class of Claims to accept the Plan, creditors holding at
least two-thirds (2/3) in dollar amount and more than one-half
(1/2) in number of the "voting" Claims must accept the Plan. If you
do not vote, you lose your right to be part of the determination as
to which way your Class will vote. The votes from each Class will
be counted separately to determine whether the Class as a whole
voted to accept or reject the Plan.
15. If my Class votes to accept the Plan, do I get what the Plan
provides for my Class?
Usually, but not automatically. The Plan first must be confirmed
by the Bankruptcy Court. You must also have an Allowed Claim, which
is a Claim that is not a Disputed Claim. The Plan defines what is
an Allowed Claim and a Disputed Claim. If you have filed a
timely
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proof of claim and no objection is made to your claim, your
Claim is deemed allowed. You will be notified of any objection to
your Claim.
16. How do I vote on the Plan?
To vote on the Plan, mark the accompanying ballot and return it
in accordance with the instructions noted on your ballot. Chapter
X, Section C and Chapter XI of this Disclosure Statement contain
additional information relating to voting.
17. Is my Claim or Equity Interest being paid in full under the
Plan?
The Plan provides a structure for the liquidation of the assets
and distribution of the proceeds thereof to creditors in accordance
with their priorities as set forth in the Bankruptcy Code and the
Plan and as may be determined by the Bankruptcy Court in resolving
objections to Claims and Disputed Claims. The Debtor's ability to
make any Distributions with respect to Claims and Preferred Stock
(as well as the amount of any such Distribution) is directly
related to, among other things, the outcome of certain pending
litigation between the Debtor and third parties (including the
FDIC-Receiver, BB&T and the Alabama Revenue Department) and the
value of all assets available for liquidation and the Debtor's
results in liquidating these assets, after payment of the
reasonable and necessary expenses that the Debtor and the Plan
Committee (and the professionals retained by the Debtor and the
Plan Committee with Bankruptcy Court approval) incur during the
liquidation process. The Debtor believes that Allowed Claims in the
following categories and classes will be paid in full:
Administrative Claims; Priority Tax Claims; Class A - Priority
Non-Tax Claims; Class B - Certain Secured Claims; and Class C -
Secured Claim of Alabama Revenue Department. The Debtor does not
believe that Allowed Claims in the following categories and classes
will be Paid in Full: Class D - Convenience Claims; Class E -
Certain General Unsecured Claims; and Class F - Indenture Claims.
The Debtor does not anticipate that the liquidation of its assets
will result in any payment to the Holders of Claims in Class G -
Statutorily Subordinated Claims or the Holders of Preferred Stock
in Class H - Preferred Stock. Under the Plan, Holders of Equity
Interests (other than Preferred Stock) in Class I - Equity
Interests other than Preferred Stock will not receive or retain any
property under the Plan on account of such Equity Interests.
18. What is the amount of my Claim or Equity Interest?
The amount of your Claim depends on the amount owed to you by
the Debtor or the value of the goods or services you provided to
the Debtor. Therefore, the amount of each creditor's Claim against
the Debtor varies. The amount of your Equity Interests depends on
the number of such interests you hold. As discussed above, each
Holder of an impaired Allowed Claim (other than Class G) will
receive a ballot. If you do not receive a ballot and believe you
should have, you should contact J. David Freedman at (404)
523-6995. If the Debtor objects to your Claim, you will receive
notice of this objection and will have an opportunity to contest
the objection.
19. When will the Distribution on my Claim be made?
Before any Distributions can be made, the Plan first must be
confirmed by the Bankruptcy Court, a topic discussed at greater
length in Chapter XI and in Exhibit B to this
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Disclosure Statement. The initial Distribution to Holders of
Allowed Priority Non-Tax Claims and Allowed General Unsecured
Claims will be made on the Initial Distribution Date, which
pursuant to Section 9.3(a) of the Plan is a date no later than
thirty (30) days after the later of the Effective Date or the first
date on which the Debtor determines it has Available Cash in an
amount sufficient to make an initial Distribution in accordance
with the Plan to the Holders of Priority Non-Tax Claims.
20. To what address will the Distribution be sent?
The Debtor, through the Plan Trustee, intends to send any
Distribution directly to each creditor holding an Allowed Claim or,
in the case of Class F, to the applicable Indenture Trustee. In the
case of an Allowed Claim that is not impaired under the Plan,
Distributions will be sent to the last known address of the Holder
of such Claim. The ballot sent to each Holder of an impaired
Allowed Claim will include an address for the creditor. The initial
Distribution will be sent to that address, unless the creditor
notifies the Court (and the Plan Trustee) in writing prior to the
date on which the hearing on confirmation of the Plan is initially
scheduled that the address listed on the ballot is incorrect or
should be changed. The ballot will contain spaces for the creditor
to correct the listed address. Unless a creditor gives timely
written notice of a change or correction in address, the
Distribution to each creditor holding an impaired Allowed Claim
will be sent to the address listed on the ballot. Any subsequent
Distributions will be sent to the same address, unless that address
is superseded by proofs of claim or transfer of claims filed
pursuant to Bankruptcy Rule 3001 (or at the last known address of
such creditor if the Plan Trustee has been notified in writing of a
change in address). Neither the Debtor nor the Plan Trustee will be
liable to any creditor in the event that a Distribution made on
account of the creditor's claim is sent to an incorrect address. If
any Distribution is made to Holders of Preferred Stock, the Debtor
will be authorized to rely upon information regarding such Holders
from DTCC.
21. Is the Debtor suing people responsible for any losses
suffered by the Debtor?
The Debtor and the Case Committee are evaluating potential
claims against third parties when a question exists as to whether
their conduct caused any loss to the Debtor and such conduct is
actionable. The Plan Trustee will continue this process. Under the
Plan, all Claims are reserved except those Claims expressly
released under the Plan, an order confirming the Plan or other
order of the Bankruptcy Court. Claims that are reserved include (i)
potential claims against the former management of the Debtor and
former professionals retained by the Debtor (such as accountants
and attorneys) with respect to acts or omissions prior to the
Petition Date and (ii) potential claims for the recovery of assets
of the Debtor. A description of the types of potential claims being
evaluated may be found in Chapter VII of this Disclosure Statement.
The Debtor's evaluation, however, is limited to the rights which
the Debtor, as a corporate entity, may have against these third
parties, and any recovery would become an asset of the Debtor's
bankruptcy estate subject to distribution in accordance with the
terms and priorities set forth in the Plan, if confirmed by the
Bankruptcy Court. In addition, the Debtor may pursue, when
appropriate, the recovery of preferential and fraudulent transfers.
Any person who received a preferential or fraudulent transfer of an
interest in the Debtor's property is subject to an action under
Sections 547 or 548 of the Bankruptcy Code (or applicable state
law) to recover this interest in the Debtor's property.
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22. Do I have additional rights or remedies against third
parties?
You may. Depending on the circumstances in which your Claim or
Equity Interest arose, you may have independent and direct rights
and remedies against third parties for recovery of all or a portion
of your Claim(s) against or Equity Interests in the Debtor.
Evaluation of such Claim(s) is a factually intensive process and is
best determined through consultation between qualified counsel and
you. Please note that any claim which you have against a third
party is subject to a statute of limitations which specifies the
time by which any such claim must be pursued or be barred. The
length of time by which a claim must be asserted varies depending
upon the type of claim and the circumstances under which the claim
arose. You should consult with your legal counsel about the statute
of limitations applicable to any claim you might have. The Debtor
and its counsel are not authorized or in a position to advise you
on the potential claims you might have against third parties or the
time by which any such claims must be asserted.
The Debtor expresses no opinion with regard to the existence,
validity or merit of any such claims against third parties and is
not authorized under the Plan, or otherwise, to pursue such claims
that are held solely by third parties and not the Debtor. The Plan
does not restrict your right, if any, to bring such direct and
independent claims against third parties in an effort to recover
all or a part of any unpaid Claim against the Debtor, except that
(i) the Plan, if confirmed, does restrict whatever right (if any)
that any Holder of a Claim may have to assert against another
Holder of a Claim any alleged rights of Contractual Subordination
as to any Distribution being made under the Plan and (ii) Section
10.3 of the Plan contains an exculpation of Exculpated Parties for
acts or omissions during the pendency of the Case and prior to the
Effective Date (other than liabilities determined by a Final Order
to be attributable solely to an Exculpated Party's (a) own gross
negligence or willful misconduct or (b) violations of state or
federal criminal laws).
23. Are there risk factors associated with consummation of the
Plan?
There are substantial risk factors, more fully set forth in
Chapter XII (Risk Factors) that may significantly and adversely
affect the timing and ability of the Debtor to make Distributions
(or the size of any Distributions) as contemplated by the Plan. In
particular, if positions taken in this Case by the FDIC-Receiver
are sustained, either in the court of original jurisdiction or on
appeal, there is a substantial risk that there would be little, if
any, Distributions for creditors and that the Case could be
converted to one under Chapter 7 of the Bankruptcy Code.
24. Have there been settlement discussions with the
FDIC-Receiver?
Yes. Chapter XII, Section B.3 of this Disclosure Statement
discusses in detail the present status of efforts to settle a
number of contested disputes between the Debtor and the
FDIC-Receiver. Settlement with the FDIC-Receiver is by no means
assured.
Chapter III. GENERAL INFORMATION ABOUT THE DEBTOR
Some of the information set forth in this Chapter III of the
Disclosure Statement is taken from the filings by the Debtor with
the Securities and Exchange Commission (the
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"SEC"). For more detailed information regarding the events and
transactions summarized in this Chapter III, please refer to these
SEC filings.
A. Debtor's Business and Events Leading to Bankruptcy Filing
The Debtor is a Delaware corporation that was organized in 1974
as a bank holding company under the Bank Holding Company Act of
1956, as amended. The Debtor was originally organized as "Southland
Bancorporation," and its name was changed to The Colonial
BancGroup, Inc. in 1981. Pursuant to the Gramm-Leach-Bliley
Financial Services Modernization Act, the Debtor elected to become
a financial holding company.
As a bank holding company, the Debtor, through Colonial Bank and
other non-bank subsidiaries, provided diversified financial
services, including retail and commercial banking, wealth
management services, and mortgage origination and insurance
products to consumers and businesses. The principal activity of the
Debtor was to supervise and coordinate the business of its
subsidiaries and to provide them with capital and services.
Pursuant to the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, the Debtor consolidated its various banking
subsidiaries into its wholly-owned and principal operating
subsidiary, Colonial Bank. Colonial Bank was converted from a
national banking association into an Alabama state-chartered,
non-member bank on June 10, 2008, and its legal name was changed
from "Colonial Bank, N.A." to "Colonial Bank."
Prior to the Petition Date, the Debtor and certain of its
subsidiaries, including Colonial Bank, filed consolidated federal
income tax returns. A chart of the Debtor's known subsidiaries as
of June 30, 2009 is attached to this Disclosure Statement as
Exhibit C. As described in greater detail in Chapter V, Section 3
and Chapter VII, Sections 3-5 of this Disclosure Statement, the
Debtor believes that it may be entitled to additional federal
income tax refunds as a result of losses for tax purposes during
prior tax years.
On August 14, 2009, Colonial Bank was closed by the Alabama
State Banking Department, and the FDIC-Receiver was appointed as
receiver for Colonial Bank. Subsequent to the closure, BB&T
assumed certain of the former deposits of Colonial Bank and certain
other former liabilities and purchased certain of Colonial Bank's
former assets pursuant to the P&A Agreement.
Several days prior to the Petition Date, the FDIC-Receiver sent
an email to BB&T requesting that BB&T place a "hold" on the
Debtor's depository accounts. BB&T placed a hold on the
depository accounts which since that time has frustrated the
Debtor's ability to withdraw or otherwise utilize any funds in
those accounts, with the exception of certain limited items of
minimal dollar amounts that were apparently honored by BB&T.
The result of this hold was that many checks issued by the Debtor
after the closure of Colonial Bank and prior to the Petition Date
were returned by the drawee bank and the Debtor was unable to pay
lawful expenses in the ordinary course of its business.
As described below, the closure of Colonial Bank left the Debtor
unable to service its public debt instruments. The Alabama Revenue
Department also assessed substantial tax liabilities and filed tax
liens in the month of August 2009 against the Debtor and certain of
its
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property totaling in excess of $12,000,000. These events further
aggravated the Debtor's ability to respond to the continued
prosecution of civil litigation against the Debtor and the ongoing
investigations of the Debtor by federal criminal and regulatory
authorities. Accordingly, the Debtor determined that it was
necessary and appropriate to file a petition for relief under
Chapter 11 of the Bankruptcy Code to preserve its assets for the
benefit of all of its creditors.
To assist the Debtor in implementing this decision to file
bankruptcy and administering its Chapter 11 case, the Debtor's
board of directors authorized the Debtor's retention of a chief
recovery officer and the hiring of Kevin O'Halloran of Atlanta,
Georgia, to fill that position (the "CRO"). With the assistance of
the CRO and Debtor's counsel, this Chapter 11 case was commenced on
August 25, 2009.
B. Debtor's Capital Structure
1. Common Stock.
Prior to the closure of Colonial Bank, the Debtor's stock was
listed on the New York Stock Exchange (the "NYSE"). As of August
14, 2009, there were approximately 202,741,587 shares of the
Debtor's common stock outstanding. On August 17, 2009, the NYSE
suspended trading in the Debtor's common stock and its other
securities. The NYSE determined that the Debtor's securities were
no longer suitable for listing on the NYSE due to the closure of
Colonial Bank, the Debtor's principal operating subsidiary. The
NYSE filed with the SEC a Form 25-NSE to remove its securities from
listing and registration from the NYSE. On November 15, 2010, the
registration of each class of the Debtor's securities registered
with the SEC was revoked, without opposition by the Debtor.
2. Preferred Stock.
As of the Petition Date, the Debtor had (or may be deemed to
have had) outstanding 300,000 shares of preferred stock (the "New
Preferred Stock") allegedly as a result of the occurrence of an
exchange event under which REIT preferred securities (the "REIT
Preferred Securities") in CBG Florida REIT Corp. (the "Trust") were
transferred to the Debtor and the Debtor issued (or was deemed to
have issued) the New Preferred Stock to the former holders of the
REIT Preferred Securities. The Debtor believes that the New
Preferred Stock was issued (or deemed issued) by it on or about
August 10, 2009, four days before Colonial Bank was placed in
receivership and 15 days before the Debtor filed for bankruptcy
protection. The FDIC claims to have sent a letter to the Debtor,
Colonial Bank, the Trust and CBG Nevada Holding Corp. stating that
an "Exchange Event" had occurred within the meaning of the
documents governing the REIT Preferred Securities, which the
FDIC-Receiver contends had the result of automatically converting
all REIT Preferred Securities in the hands of investors into shares
of New Preferred Stock. According to the Form 8-K filed by the
Debtor on August 12, 2009 (the "REIT Preferred 8-K"), the exchange
was consummated effective as of 8:00 a.m. New York time on August
11, 2009. In the REIT Preferred 8-K, the statement is made that,
until certificates representing the New Preferred Stock are issued,
the certificates representing the REIT Preferred Securities "will
be deemed for all purposes to represent BancGroup [New Preferred
Stock]." Issues and claims related to this exchange and the
issuance of preferred stock by the Debtor are described in greater
detail in Chapter V, Section 6 of this Disclosure Statement.
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3. Public Debt.1
The Debtor's capital structure is dominated by a preferred
securities issuance made in 2003 (7.875% Preferred Securities) and
two debt issuances made in 2003 (Floating Rate Junior Subordinated
Deferrable Interest Debentures Due 2033) and 2008 (8.875%
Subordinated Notes Due 2038). The Debtor's obligations under these
preferred securities and debt issuances constitute General
Unsecured Claims.
a. Preferred Securities Debentures -- $103,092,800
As of the Petition Date, the Debtor had approximately
$103,092,800.00 in principal amount of 7.875% Junior Subordinated
Debentures Due 2033 (the "Preferred Securities Debentures")
outstanding pursuant to an Indenture, dated as of March 21, 2002,
between the Debtor and The Bank of New York Mellon Trust Company,
N.A., a national banking association, as successor in interest to
The Bank of New York (the "Preferred Securities Indenture
Trustee"), a New York banking corporation, as trustee, as
supplemented by a Second Supplemental Indenture, dated as of
September 16, 2003, between the Debtor and such trustee (together,
the "Preferred Securities Indenture Agreement").
Pursuant to an Amended and Restated Declaration of Trust of
Colonial Capital Trust IV, dated as of September 16, 2003, among
the Debtor, as sponsor, common securities holder and debenture
issuer, The Bank of New York Mellon Trust Company, N.A., as
successor in interest to The Bank of New York, as institutional
trustee, The Bank of New York (Delaware), as Delaware trustee, and
the regular trustees named therein (the "Preferred Securities
Declaration of Trust"), Colonial Capital Trust IV purchased all of
the Preferred Securities Debentures and funded such purchase by
issuing to investors $100,000,000.00 in aggregate liquidation
amount of 7.875% Preferred Securities (the "Preferred Securities")
and issuing to the Debtor $3,092,800.00 in aggregate liquidation
amount of 7.875% Common Securities. Further, pursuant to a
Preferred Securities Guarantee Agreement, dated as of September 16,
2003, among the Debtor, as guarantor, and The Bank of New York
Mellon Trust Company, N.A., as successor in interest to The Bank of
New York, as preferred guarantee trustee, the Debtor guaranteed
certain of Colonial Capital Trust IV's obligations to Holders of
Preferred Securities.
The commencement of the Debtor's bankruptcy case on the Petition
Date (i) constituted an "Event of Default" under the Preferred
Securities Indenture Agreement and (ii) rendered all amounts
outstanding in respect of the Debtor's Preferred Securities
Debentures immediately due and payable.
1 The Indenture Claim amounts which were provided to the Debtor
by the Preferred Securities Indenture Trustee and are set forth in
Chapter III, Section B.3 of the Disclosure Statement reflect the
principal amount of public debt outstanding as of the Petition
Date, and do not reflect accrued but unpaid interest outstanding as
of the Petition Date. The face amounts of proofs of claim filed in
respect of the Preferred Securities Debentures, the 2003
Debentures, and the 2008 Debentures differ from the amounts set
forth herein. The Debtor is not in a position to confirm these
amounts at this time and reserves all of its rights with respect to
the foregoing.
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The Preferred Securities Indenture Trustee may collect payments
in respect of the Preferred Securities Debentures and distribute
such payments to Holders of Preferred Securities. According to, the
Preferred Securities Indenture Trustee it is not authorized to
consent to, accept, adopt, or vote on any Chapter 11 plan of the
Debtor on behalf of Colonial Capital Trust IV or Holders of the
Preferred Securities and each Preferred Securities Holder, as the
Holder of a right to payment in respect of the Preferred Securities
Debentures, is entitled to vote on the Plan.
A question has been raised as to whether, and to what extent,
the payment of amounts owed by the Debtor with respect to the
Preferred Securities Debentures are contractually senior or junior
in right of payment to any other indebtedness owed by the Debtor to
other Holders of Claims. In a Form S-3 registration statement filed
with the SEC on February 26, 2002, the Debtor described the
Preferred Securities Debentures and stated, under a heading
entitled "Subordination," that:
Colonial BancGroup has agreed that any of the junior
subordinated debentures issued under the indenture will rank junior
to all of the senior indebtedness to the extent provided in the
indenture. Upon any payment or distribution of Colonial BancGroup's
assets to creditors upon Colonial BancGroup's liquidation,
dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any
insolvency or bankruptcy proceeding involving Colonial BancGroup,
the allocable amounts, as defined below, in respect of the senior
indebtedness must be paid in full before the holders of the junior
subordinated debentures will be entitled to receive or retain any
payment in respect thereof. (emphasis added).
If the maturity of junior subordinated debentures is
accelerated, the
holders of all senior indebtedness outstanding at such time will
first be entitled to receive payment in full of the allocable
amounts in respect of such senior indebtedness before the holders
of junior subordinated debentures will be entitled to receive or
retain any payment in respect of the principal of or interest on
the junior subordinated debentures.
No payments on account of principal or interest in respect of
the junior
subordinated debentures may be made if there is a default in any
payment with respect to senior indebtedness, or an event of default
exists with respect to any senior indebtedness that accelerates the
maturity of the senior indebtedness, or if any judicial proceeding
shall be pending with respect to the default. The Preferred
Securities Indenture Agreement contains an article entitled
"Subordination
of Securities," which states, under a provision entitled
"Agreement to Subordinate," in relevant part that:
The payment by the Company of the principal of, premium, if any,
and interest (including Compound Interest and Additional Sums, if
any) on all Securities issued hereunder shall, to the extent and in
the manner hereinafter set forth, be subordinated and junior in
right of payment to the prior payment in full
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of all Senior Indebtedness of the Company and rank pari passu
and equivalent to creditor obligations of those holding general
unsecured claims not entitled to statutory priority under the
United States Bankruptcy Code or otherwise, in each case whether
outstanding at the date of this Indenture or thereafter incurred.
(emphasis added).
The term "Securities" is defined in the Preferred Securities
Indenture Agreement in two complimentary provisions, the first
being the indenture's initial recital and the second being a
provision from the indenture's definition section, as follows:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance from time to time of its debt securities to
be issued in one or more series (the "Securities")
*** "Security" or "Securities" shall have the meaning stated in
the first recital
of this Indenture and, more particularly, means any debt
security or securities, as the case may be, authenticated and
delivered under this Indenture.
The term "Senior Indebtedness" is defined in the Preferred
Securities Indenture Agreement as follows:
"Senior Indebtedness" shall mean the principal of (and premium,
if any) and interest, if any, (including interest accruing on or
after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not such claim
for post petition interest is allowed in such proceeding), on all
Indebtedness, whether outstanding on the date of execution of this
Indenture, or hereafter created, assumed or incurred, except
Indebtedness Ranking on a Parity with the Securities or
Indebtedness Ranking Junior to the Securities, and any deferrals,
renewals or extensions of such Senior Indebtedness. (emphasis
added).
The terms "Indebtedness," "Indebtedness Ranking on a Parity with
the Securities" and "Indebtedness Ranking Junior to the Securities"
are defined in the Preferred Securities Indenture Agreement as
follows:
"Indebtedness" shall mean, whether recourse as to all or a
portion of the assets of the Company and whether or not contingent,
every obligation of the Company for money borrowed, whether or not
evidenced by bonds, debentures, notes or other written instruments,
except that "Indebtedness" shall not include trade accounts payable
accrued liabilities arising in the ordinary course of business.
(emphasis added)
"Indebtedness Ranking on a Parity with the Securities" shall
mean (i) Indebtedness, whether outstanding on the date of execution
of this Indenture or hereafter created, assumed or incurred, to the
extent such Indebtedness by its terms ranks pari passu with and not
prior or senior to the Securities in the right of payment upon the
happening of the dissolution, winding-up, liquidation or
reorganization of the Company, and (ii) all debt securities issued
to any Colonial
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Capital Trust, or a trustee of such trust, partnership or other
entity affiliated w