(Adds Fitch rating action, updates stock price)
DOW JONES NEWSWIRES
Colonial BancGroup Inc. (CNB) said Tuesday its Colonial Bank
unit agreed to oversight by the Federal Deposit Insurance Corp. and
Alabama Banking Department and other steps to fix problems with its
financial condition and performance.
Shares sank as much as 55% to 55 cents, then rose to 85 cents,
in after-hours trading as the bank also said it would increase its
capital levels, reduce its level of criticized assets and
concentrations of credit, and improve its earnings.
After the announcement, Fitch Ratings cut its long-term issuer
default rating two notches deeper into junk territory, to CCC, or
highly speculative. It also downgraded its long-term IDR on
Colonial Bank two notches to B-.
Fitch said the action by regulators could hurt a planned deal
for Colonial to receive a $300 million capital infusion from an
investor group led by mortgage lender Taylor, Bean &
Whitaker.
Chief Executive Lewis Beville said the agreement doesn't affect
customer deposit accounts or loans.
Late last month, Robert Lowder, Colonial's combative chief
executive, said he intends to step down from the Southeastern
regional bank he founded in 1981.
That announcement came as the company awaits federal approval of
the capital infusion from Taylor, Bean & Whitaker. The bank has
been operating under strict guidance from regulators and was
promised aid from the Treasury Department if it could raise $300
million privately.
Lowder built Colonial into a $26 billion institution via a
string of aggressive community bank acquisitions throughout the
Southeast. But during the recent financial crisis he has been the
target of analysts and shareholders angry about the company's
plummeting share price and performance. The bank lost $88.5 million
in 2008, hurt by its exposure to Florida's real-estate collapse and
the bank's focus on construction lending.
-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975;
Kathy.Shwiff@dowjones.com