Deal's End Raises Questions for Colonial

The deal for a group of investors led by Taylor, Bean & Whitaker Mortgage Corp., Orlando, to make a $300 million capital infusion into The Colonial BancGroup Inc., Montgomery, Ala., is dead. A statement included in Colonial's second quarter 2009 results said both sides agreed to terminate the deal because it had not closed by a July 31 deadline; among the conditions outstanding was approval by the Office of Thrift Supervision. The death of the transaction will probably mean Colonial will not receive $550 million from the U.S. Treasury's Capital Purchase Program. Colonial lost $606 million ($3.02 per share) in the second quarter 2009, including a loan loss provision of $294 million and net charge-offs of $244 million. The company also included in the statement that there is doubt about Colonial's ability to continue. Fitch Ratings cut Colonial's long-term issuer default rating from "CCC" down to "C," stating it believed it will be extremely challenging for Colonial to raise the required capital by a Sept. 30 deadline established under a cease and desist order.