Trups Investors Add to Pressure on Deadbeat Banks

Trust-preferred creditors are starting to give deadbeat banks an unenviable choice: negotiate repayment or run the risk of forced liquidation. Trapeza Capital Management filed legal documents in July to force FMB Bancshares in Lakeland, Ga., into involuntary bankruptcy. Trapeza is owed $13.6 million in unpaid debt and interest. BNY Mellon said in May that it would let a group of investors in passively managed trust-preferred CDOs coordinate action against banks that are in default. BNY Mellon's move will likely make it easier for investors to sue defaulted banks, potentially setting off a wave of involuntary bankruptcies.