Corus Bankshares Inc. (fka CORSQ)

[helmsman]

FDIC Seeks Dismissal of Corus Bankruptcy Plan

http://online.wsj.com/article/SB10001424053111904836104576556862718159834.html?mod=googlenews_wsj

By ERIC MORATH

The Federal Deposit Insurance Corp. is asking a bankruptcy judge to reject Corus Bankshares Inc.'s Chapter 11 plan, contending that it is slanted in favor of the hedge fund backing it to the detriment of the regulator that seized Corus Bank NA in 2009.

Corus Bankshares has pitched a plan that would see the bank holding company resurrect itself as a real-estate investment firm, if it succeeds in collecting on lawsuit worth up to $265 million that it filed against the FDIC over disputed tax refunds.

While the FDIC is fighting the suit, the bank regulator said in papers filed Tuesday with the U.S. Bankruptcy Court in Chicago that if Corus Bankshares prevails, the plan would unfairly push down a debt owed to the FDIC on par with that of other junior debt holders, including unsecured creditors.

"The plan violates the absolute priority rule and is therefore unconfirmable," the FDIC said in court papers.

Furthermore, the FDIC said the plan wrongly guarantees fees to Tricadia Capital Management, the hedge-fund manager that bought Corus Bankshares' securities tied to collateralized-debt obligations earlier this year, and then used its position to spearhead the current plan.

The lawsuits involving the FDIC and the holding company remain pending in the U.S. District Court in Chicago. But the two sides agree that if Corus Bankshares is found to have the primary right to the disputed tax refunds, then Corus Bank, for which the FDIC is the receiver, would have a valid claim against its former parent for the portion of those refunds that are attributable to the bank.

However, the proposed treatment of that potential claim has the FDIC balking at the plan.

The Chapter 11 proposal says that the FDIC's claim would stand on par with unsecured claims, including those of Tricadia and other investors that own so-called trust-preferred securities.

In court papers, the FDIC argues that those securities are essentially a hybrid of debt and equity that should sit below its claims, which it says should be categorized as an intercompany loan from the bank to its parent.

The regulator also took exception to the fees that would be paid to Tricadia and the administrators of the bank-created trusts that issued the securities. Those fees are set to be paid on an "administrative" basis, meaning they would be paid before creditors share in any payment.

Corus Bankshares, which filed for Chapter 11 shortly after its bank was seized in September 2009, was set to liquidate, following the pattern of other holding companies that saw their banks fail during the financial crisis.

However, the Chicago company's trust-preferred security holders protested that plan, opening the door for Tricadia to push for a reorganization strategy instead.

Under that proposal, which a judge will consider Sept. 27, Corus Bankshares would continue to pursue its lawsuit against the FDIC. Should the company prevail, Corus Bankshares would reorganize around those funds and a dormant real-estate investment business that was run separately from the bank.

Write to Eric Morath at [e-mail]