Privately-held commercial real estate finance company Capmark Financial Group, Inc. on Sunday announced that along with certain of its subsidiaries, it has filed for voluntary bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code, after it reported a huge loss in its second quarter. Capmark, partly owned by Goldman Sachs Group, Inc. (GS), intends to restructure its corporate debt under the reorganization process.
Capmark noted that it's businesses would continuing to operate in the ordinary course. However, Capmark Bank, which received $600 million of new equity from Capmark in October, is not part of the filing, the company added.
In a statement, president and chief executive officer, Jay Levine said, "We view this reorganization process as an unfortunate but necessary response to recent unprecedented conditions in financial and commercial real estate markets, which presented a significant challenge for Capmark and similarly situated finance companies. By constraining the availability of capital, these difficult market conditions had a negative effect on all our core businesses."
In March 2006, a private investment group led by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners and Goldman Sachs Capital Partners acquired a 78% stake in GMAC Commercial Holding from the wholly-owned financial arm of automaker General Motors Co. (MTLQQ.PK), General Motors Acceptance Corp. or GMAC for $1.5 billion in cash. The deal also included the payoff of all intracompany debt owed to GMAC, bringing the total value of the deal to $9 billion. The new entity, in which GMAC owns a 21% interest, was then known as Capmark Financial Group, Inc.
Horsham, Pennsylvania-based Capmark has been engaged in extensive and constructive negotiations over the past few months with representatives of a number of lenders and senior noteholders regarding a restructuring of its primary debt obligations, and expects to reach an agreement soon.
The restructuring efforts have included entering into a $1.5 billion Term Facility Credit and Guaranty Agreement on May 29, 2009 and amendments to its existing senior credit facility and bridge loan agreement.
As part of its efforts for a longer-term restructuring, Capmark has also been exploring strategic alternatives for all of its businesses. Recently, Capmark agreed to sell the North American servicing and mortgage banking businesses to Warren Buffett's Berkshire Hathaway, Inc. (BRKa) and Leucadia National Corp. (LUK) for $490 million. Last week, Capmark agreed to sell its Japanese loan servicing business Premier Asset Management to UK-based fund management firm Sandringham Capital Partners.
Among Capmark's subsidiaries that have not filed for chapter 11 are Capmark Bank, Capmark Investments LP, Capmark Securities, Inc., and its Asian, Indian and European subsidiaries. However, certain additional Capmark subsidiaries may file for Chapter 11 in the future.
On September 2, Capmark reported in early September a net loss of $1.6 billion for the second quarter, compared to net income of $11.5 million in the year-ago quarter,primarily due to increased losses on loans, investments and real estate, an increased provision for loan losses and downward valuation adjustments on its mortgage servicing rights. As of June 30, 2009, Capmark's stockholders' deficit was $1.1 billion and its total assets were $20.1 billion.
Capmark's financial advisors are Lazard Frères & Co. LLC and Loughlin Meghji + Company. Capmark's bankruptcy counsel is Dewey & LeBoeuf LLP.
GS closed Friday's regular trading session at $180.36, down $3.33 or 1.81% on a volume of 9.22 million shares, marginally lower than the three-month average volume of 9.59 million shares.
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