Here we are:
By ERIC MORATH
Once slated for liquidation, Corus Bankshares Inc. received court approval for its bankruptcy-exit plan that calls for the former Illinois bank-holding company to emerge as a real-estate investment firm.
Judge Pamela S. Hollis of the U.S. Bankruptcy in Chicago this week signed off on the plan Corus Bankshares crafted alongside hedge-fund manager Tricadia Capital Management that results in the rare revitalization of a bank holding company whose subsidiary bank was seized by regulators.
With court approval in hand, Corus now intends to pursue a $257 million lawsuit against the Federal Deposit Insurance Corp., the agency that became Corus Bank NA's receiver in September 2009. If that lawsuit is successful, it would provide funds for Corus Bankshares to restart a dormant real-estate investment operation, court papers said.
The FDIC and Corus Bankshares are fighting over the rights to potentially valuable tax write-offs called net operating losses. Under tax law, a Corus entity could count losses suffered as the bank careened toward failure amid the financial crisis against profits made earlier in the decade when it boomed as a real-estate lender.
Whether the right to the tax benefits lies at the parent company level or with the underlying bank is in dispute.
Under the approved plan, Corus Bankshares will be owned by the bank-holding company's unsecured creditors, primarily Tricadia and other holders of securities related to collateralized-debt obligations, or CDOs. Those creditors, owed $415.6 million, will have the option to take a cash payment or equity in the reorganized company.
Corus's existing ownership, however, will be wiped out as their stock "shall be deemed cancelled," according to the plan.
Outside bankruptcy, a company typically can't tap the full value of its operating losses if it has a major ownership change, but in Chapter 11, a company is allowed to retain rights to the tax benefits if its creditors swap their debt for equity.
Corus Bankshares gained approval for the plan after it won the backing of five major claim holders that voted last year to reject a previously proposed liquidation plan. While creditors would have received just pennies on the dollar in liquidation, they could receive a recovery of more than 50% if the company succeeds in the FDIC suit.
That would be a significant recovery for holders of CDO-tied securities that often receive little when bank-holding companies unwind in bankruptcy.
The Corus Bankshares CDOs that Tricadia bought into are collections of so-called trust-preferred securities, which are investment instruments issued by bank-created trusts.
Such securities were frequently issued in the 1990s as a way for bank-holding companies to raise capital on the cheap and without diluting their shareholders. Now those securities are often associated with bank failures.
As the financial crisis took hold, trust-preferred securities often stood in the way of outside investors offering capital to rescue banks because securities holders had to be paid in full before the bank could count any additional capital.
As a result, federal and state regulators seized undercapitalized banks, leaving their holding companies to frequently liquidate, a fate Corus avoided.