SunTx May Buy Into Colonial BancGroup

Colonial BancGroup Inc (CNB.N) posted its third straight quarterly loss, which was much wider than market estimates, as the financial services firm recorded a massive goodwill impairment charge and loan loss provision.

Colonial, which has received about half a billion dollars in funds from the U.S. Treasury, said the funds were subject to its increasing equity by $300 million, for which it is actively pursuing a variety of capital raising alternatives.

The Montgomery, Alabama-based Colonial said it is currently in negotiations with several investors including SunTx Capital Partners.

The company said it has signed a non-binding letter of intent with SunTx Capital Partners and prospective co-investors for a potential investment of up to 24.9 percent of its proforma capitalization with a price range of $1.00 per share to $1.50 per share.

Colonial also said it has frozen salaries for executives in 2008 and 2009, and eliminated bonuses in 2008. The company has also done away with pay hikes and non-production incentive plans for all employees in 2009.

The company said it sold about $317 million of problem assets and transferred another $49 million to held for sale during the quarter, charging-off $415 million. Colonial has taken aggressive steps to shore up capital and curb its non-performing loan portfolio, but has seen little headway in its efforts.

Fourth-quarter results included a non-cash charge of $575 million and a tax benefit of $40.6 million from the impairment charge, or $2.66 per share net for goodwill impairment.

The company’s shares, which have lost 88 percent of their value in the past 52 weeks, fell 24 percent to $1.20 after the bell. They had closed at $1.58 Tuesday on the New York Stock Exchange. (Reporting by Amiteshwar Singh in Bangalore; Editing by Pratish Narayanan)