Capitol Bancorp Ltd.'s deal for a $50 million equity investment from ValStone Partners LLC has collapsed, severing a key component of the bank-holding company's reorganization plan, Dow Jones Daily Bankruptcy Review Small Cap reported yesterday. The Michigan company said in a regulatory filing last week that affiliates of private-equity firm ValStone terminated their agreement to buy 1.75 million shares of Capitol Bancorp's Class B common stock for $35 million and 15,000 shares of Capitol Bancorp's Series A preferred stock for $15 million. The would-be purchaser had the right to back out of the deal at any time before its due-diligence period expired on Nov. 30, Capitol Bancorp said. The private-equity firm ended up terminating the deal on the deadline. As part of its agreement with ValStone, Capitol Bancorp agreed to reimburse the investor for its due-diligence costsa payment that required the approval of the Federal Deposit Insurance Corp. But Capitol Bancorp received several denials from the FDIC for the reimbursement. While Capitol Bancorp said in bankruptcy-court papers late last month that it had ultimately reached an agreement with the FDIC on Nov. 21, the company said in the regulatory filing that ValStone's diligence review was never performed. Capitol Bancorp filed for chapter 11 bankruptcy in August with a plan to restructure by swapping $158.1 million in debt for equity in the reorganized company.
