MCorp Says Regulators Consent to a Reprieve

MCorp, the financially troubled Texas bank holding company that two weeks ago reported a quarterly loss of $517 million, said Sunday that it has reached an “understanding” with federal regulators that reduces the immediate pressure for it to seek bankruptcy protection.

In an unusual Sunday statement, MCorp said it had an “understanding” with the Federal Deposit Insurance Corp. “under which MCorp’s request for assistance can be considered in an environment which supports the stability of the company’s subsidiary banks.”

The Federal Reserve Board and the federal comptroller of the currency have agreed to suspend any actions against MCorp and its subsidiary banks while negotiations continue with the FDIC, MCorp said.

Step Toward Resolution

MCorp last month requested a federal bailout that would involve an estimated $1 billion from the FDIC and $400 million in new capital from private sources and a stock offering.

But last week, Gene Bishop, MCorp’s chairman, said there was a “high probability” that the bank holding company would file for bankruptcy or be forced to seek bankruptcy by its creditors within 30 days.

While the brief MCorp statement Sunday did not address specifics of the negotations between the FDIC and MCorp, company spokeman George McCane said the understanding with the FDIC “reduces the pressure from the regulators that might force MCorp to file for reorganization.”

“The understanding that we’ve reached with the regulatory authorities reflects a healthy level of cooperation between MCorp, the FDIC, the OCC (comptroller of the currency) and the Federal Reserve,” McCane said. “It’s a step toward resolving MCorp’s capital needs.”

Bishop, in Sunday’s statement, said MCorp “first and foremost wants to maintain the stability of the company’s subsidiary banks while working with the regulatory agencies to develop a comprehensive solution which considers the interests of all our constitutents.”

“The FDIC has told us that our assistance proposal merits consideration and will serve as the basis for further negotiation,” he said.

MCorp’s statement did not address its reported plan to use $400 million in cash reserves from the sale of its MTech subsidary as part of its bailout package, a plan said to be opposed by the FDIC.

In a separate statemnent, the FDIC said: “The agreement (with MCorp) does not address the disposition of certain aspects of the holding company.”