SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of earliest event reported): August 17, 2001
COLONIAL TRUST COMPANY
(Exact name of registrant as specified in its charter)
ARIZONA 0-18887 75-2294862
(State or other jurisdiction of (Commission File No.) (IRS Employer ID No.)
incorporation)
5336 N. 19th Avenue, Phoenix, Arizona 85015
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (602) 242-5507
______________________________________________
(Former name or former address, if changed since last report)
2
COLONIAL TRUST COMPANY
FORM 8-K
CURRENT REPORT
ITEM 5. OTHER EVENTS
On March 16, 2001, Stevens Financial Group, Inc. ("Stevens") filed a
Voluntary Petition under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Arizona (Case No.
01-03105-ECF-RTB) (the "Stevens Bankruptcy Proceeding"). Colonial Trust Company
("Colonial") serves as Trustee under a series of Trust Indentures which secure
obligations of Stevens under certain Time Collateralized Certificates and Fixed
Rate Investment Certificates (debt instruments).
Stevens has defaulted on all of its outstanding Collateralized Time
Cerificates and Fixed Rate Investment Certificates. Based on information
provided to it, Colonial believes that as of the date of Stevens filing of its
Chapter 11 Petition, the aggregate unpaid principal amount of such debt
instruments was approximately $64 million, and accrued and unpaid interest
through the date of the Chapter 11 Petition was approximately $13.5 million.
Colonial has received a demand letter from counsel for the Official
Committee of Investor Creditors in the Stevens Bankruptcy Proceeding. This
demand letter, a copy of which is attached hereto as Exhibit 1, alleged that
Colonial made certain errors and omissions in the performance of its duties as
Indenture Trustee under the above Trust Indentures. In such demand letter, the
Official Committee of Investor Creditors stated that it is in a position to
commence a lawsuit against Colonial for damages, in the amount of approximately
$61 million as of the date of such letter, allegedly suffered by such Investor
Creditors. Colonial has provided the letter to its E&O insurance carrier.
Colonial denies legal liability for the claims set forth in the above
demand letter. However, the maximum coverage afforded under applicable insurance
policies is $5 million. In the event Colonial incurs liabilities which are not
covered by one or more of its insurance policies, such liabilities could have a
material adverse impact on the Company's financial condition and results of
operations. Moreover, in certain instances such liabilities or other occurrences
in the Stevens Bankruptcy Proceeding could affect the Company's Certificate
issued by the Arizona Banking Department. Such Certificate must be maintained in
order for Colonial to operate as a trust company in Arizona. If the Company were
unable to recover the costs and expenses it has incurred to date in connection
with the Stevens Bankruptcy Proceeding, or if the Company incurs additional
costs and expenses in connection with such Proceeding or in connection with the
claims shich have been threatened by the Official Committee of Investor
Creditors, this could have a material adverse effect on the Company's financial
condition, results of operations, and Certificate issued by the Arizona Banking
Department.
ITEM 7. EXHIBITS
1. Letter from Official Committee of Investor Creditors to Colonial Trust
Company
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
September 18, 2001. COLONIAL TRUST COMPANY
By: /s/ John K. Johnson
John K. Johnson
Its Chief Executive Officer