Capmark Financial Group Inc. (“Capmark”) today announced that Capmark and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. Capmark intends to use the reorganization process to implement a restructuring that reduces its corporate debt and maximizes value for its stakeholders. Capmark’s businesses are continuing to operate in the ordinary course.
Capmark Bank, which recently received $600 million of new equity from Capmark, is not part of the filing. The Chapter 11 proceedings are not expected to have an impact on Capmark Bank, its existing lending commitments and deposits or its ability to conduct trust services. Capmark Bank will continue to serve its customers.
Capmark has filed a variety of customary first day motions to enable it to continue to conduct business in the ordinary course during the Chapter 11 process, including motions to allow Capmark to pay vendors for post-petition goods and services and to pay salaries and continue benefits to its employees. The filing should not impact the way Capmark does business with its customers and partners.
As of October 23, 2009, Capmark and its filing subsidiaries had in excess of $500 million of cash and cash equivalents (excluding cash held by Capmark Bank) available to fund its operations. Capmark believes that it has sufficient current liquidity to continue to satisfy customary obligations associated with ongoing operations of its business, including payment of employee salaries and benefits in the ordinary course, payment of post-petition obligations, servicing advances, and funding of loans.
Jay Levine, president and chief executive officer of Capmark, 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.”
Mohsin Meghji, chief restructuring officer of Capmark, said: “The Chapter 11 process will give Capmark the opportunity to restructure our balance sheet while continuing to focus on maximizing value for our principal stakeholders. Over the past months, Capmark has engaged in extensive and constructive negotiations with our primary creditor constituencies to reach agreement on a plan of restructuring. We expect to complete this effort over the coming months.”
Capmark’s subsidiaries filing for Chapter 11 protection include Capmark Finance Inc.; Capmark Capital Inc.; Capmark Equity Investments, Inc.; Mortgage Investments, LLC; Net Lease Acquisition LLC; SJM Cap, LLC; Capmark Affordable Equity Holdings Inc.; Capmark REO Holding LLC; Summit Crest Ventures, LLC; Capmark Affordable Equity Inc. and 33 other Low Income Housing Tax Credit entities.
In addition to Capmark Bank, the following subsidiaries have not filed for Chapter 11 at this time: Capmark Investments LP, Capmark’s registered investment advisor; Capmark Securities, Inc., its registered broker dealer and its Asian, Indian and European subsidiaries. In the future, certain additional Capmark subsidiaries may file for Chapter 11 or other applicable protection.
Capmark continues to look for appropriate strategic outcomes for certain of its businesses in light of Capmark’s financial condition and the ongoing challenges of the commercial real estate market.
- In July 2009, Capmark Investments sold the management contracts of various Capmark-sponsored CDOs to Ventras Capital Advisors LLC, and in September it entered into a non-discretionary sub-advisory agreement with Urdang Capital Management Inc. with respect to two debt investment vehicles.
- As announced on September 2, 2009, Capmark and certain of its subsidiaries entered into an Asset Put Agreement with Berkadia Commercial Mortgage LLC, formerly known as Berkadia III, LLC (“Berkadia”) whereby Capmark has the right to sell to its North American servicing and mortgage banking businesses to Berkadia. Under the terms of the Asset Put Agreement, Capmark has 60 days from the date of the Chapter 11 filing to exercise the put option. Capmark intends to pursue court approval to complete the sale, subject to the receipt of any higher and better offers.
- On October 16, 2009, two Capmark subsidiaries entered into an agreement pursuant to which Capmark agreed to sell its military housing business to a third party. The consummation of the sale is subject to various conditions, including certain third party consents. Capmark intends to pursue court approval to complete the sale, subject to the receipt of any higher and better offers.
- Recently a Capmark subsidiary entered into an agreement to sell 100 percent of the outstanding shares of Premier Asset Management Company, Capmark’s Japanese loan servicing business, to a third party. Capmark intends to pursue court approval to complete the sale, subject to the receipt of any higher and better offers.
- Capmark continues to work with its creditors to determine appropriate next steps for its Asia businesses. On October 23, 2009, the majority lenders under Capmark’s senior credit agreement (the “Credit Agreement”) agreed to not exercise any right or remedy under the Credit Agreement against any of Capmark’s Japanese borrowers relating to certain events of default under the Credit Agreement, including events of default arising from Capmark’s filing for Chapter 11 protection and the failure to observe certain covenants, for a period of one month.
Capmark’s financial advisors are Lazard Frères & Co. LLC and Loughlin Meghji + Company. Capmark’s bankruptcy counsel is Dewey & LeBoeuf LLP.
For more information please visit Capmark’s web site at www.capmark.com.
About Capmark®:
Capmark is a commercial real estate finance company that operates three core business lines: lending and mortgage banking, investments and funds management, and servicing.
Forward-Looking Statements
Certain statements in this release may constitute forward-looking statements. These statements are based on management’s current expectations and beliefs but are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Capmark refers you to the documents that it posts from time to time on its web site, which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements contained in this press release.
Such forward-looking statements are made only as of the date of this release. Capmark expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Capmark’s expectations with regard thereto or changes in events, conditions, or circumstances on which any such statement is based.
Contacts:
Media:
Joyce Patterson, 215-328-3842
Joyce.Patterson@capmark.com