Colonial BancGroup files Chapter 11

NEW YORK Wed Aug 26, 2009 12:46am EDT

NEW YORK (Reuters) - Colonial BancGroup CBCG.PK filed for Chapter 11 bankruptcy protection on Tuesday, 11 days after regulators seized its banking operations and sold most of those assets to BB&T (BBT.N).

The company filed for protection from creditors with the U.S. bankruptcy court in Montgomery, Alabama, where it is based. Tuesday's filing was expected, and covers the holding company, which was not part of the asset sale to Winston-Salem, North Carolina-based BB&T, a southeast U.S. regional bank.

Colonial BancGroup said it had $45 million (27.6 million pounds) of assets and $380 million of debts as of August 14, according to the filing.

The company collapsed after an aggressive foray this decade into Florida left it exposed to many losses from construction loans and foreclosures.

A planned $300 million outside investment from Taylor, Bean & Whitaker Mortgage Corp that could have shored up its capital base fell through last month. Taylor Bean itself filed for bankruptcy protection on Monday.

The Federal Deposit Insurance Corp, which arranged the sale of most of Colonial's banking assets to BB&T, agreed to share with BB&T in losses on about $15 billion of those assets.

The Colonial case is In re Colonial BancGroup Inc, U.S. Bankruptcy Court, Middle District of Alabama (Montgomery), No. 09-32303.

(Reporting by Jonathan Stempel; editing by Carol Bishopric)

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