By Andrew Wolcott and Lindsey White and Tahir Ali
The success of Lansing, Mich.-based Capitol Bancorp Ltd.’s prepackaged Chapter 11 reorganization plan hinges on the company’s ability to raise capital — a move that observers believe could be a daunting task.
Capitol’s plan contemplates an equity infusion of at least $70 million and up to $115 million, pursuant to a separate equity commitment agreement to be entered into with certain third-party investors.
In a Form 8-K filed Aug. 9, Capitol said it has been “actively seeking” external capital sources to help restore all affiliate institutions to “well-capitalized” status in exchange for approximately 47% of the restructured company. This capital can be immediately deployed into the reorganized company’s subsidiary banks, “thus avoiding the disastrous consequences that would result from the seizure of any subsidiary bank,” the filing stated.