Colonial Cites AmTrust Ruling As Support in Fight with FDIC

Colonial BancGroup Inc. said that a recent ruling by a U.S District Court judge in Ohio involving a dispute between the FDIC and AmTrust Financial Corp. supports a bankruptcy judge's ruling in its favor last year in a similar dispute, Dow Jones Daily Bankruptcy Review reported today. Both Colonial and AmTrust were bank-holding companies whose banking subsidiaries failed in 2009 and were taken over by the FDIC. In both cases, the parents both filed for chapter 11 and have been sparring with the FDIC over commitments the holding companies made to regulators to shore up the bank's capital. In a closely watched decision last year in Colonial's chapter 11 case, Bankruptcy Judge Dwight H. Williams Jr. rejected the FDIC's bid to go after the parent for failure to maintain capital levels at the bank. In AmTrust's case, which involves a similar dispute with the FDIC, U.S. District Judge Donald Nugent pointed to the Colonial bankruptcy court decision and concluded the commitments at issue constituted promises to help reach a goal, namely to prop up the bank, but not guarantees the goal would be reached.