Capmark Files Chapter 11 Bankruptcy
Commercial real estate lender Capmark Financial Group confirmed weekend reports of its Chapter 11 bankruptcy filing as part of a reorganization after posting a $1.6bn second-quarter loss. The filing is part of a larger restructuring effort at Capmark and certain subsidiaries -- not including Capmark Bank, which is excluded from the filing. Capmark Bank recently received $600m of new equity from Capmark and should continue its business unaffected by the bankruptcy proceedings, according to a statement. "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," said president and CEO Jay Levine. "By constraining the availability of capital, these difficult market conditions had a negative effect on all our core businesses." The filing comes as Capmark previously entered an agreement with Berkadia Commercial Mortgage to sell its North American servicing and mortgage banking business to Berkadia. Under the terms of the agreement, Capmark has 60 days from the date of the Chapter 11 filing to exercise the put option. The company said it intends to pursue court approval to complete the sale, subject to the receipt of any higher offers. "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," said chief restructuring officer Mohsin Meghji. "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 and the subsidiaries filing the bankruptcy had more than $500m of cash and cash equivalents, and sufficient liquidity to continue ongoing operations, the company said. Capmark filed the customary motions to enable its continued business during bankruptcy. Subsidiaries filing in Capmark's bankruptcy include Capmark Finance, Capmark Capital, Capmark Equity Investments, Mortgage Investments, Net Lease Acquisition, Capmark Affordable Equity Holdings, Capmark REO Holding, Summit Crest Ventures, Capmark Affordable Equity and 33 other low-income housing tax credit entities. Write to Diana Golobay.